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Bathinda refinery's fate uncertain
Gaurav Choudhury
Tribune News Service

New Delhi, November 21
Uncertainty looms large over the fate of the 9 million tonne oil refinery in Bathinda with the Punjab Government voicing serious reservation about continuing the fiscal concessions and other associated tax incentives for the project.

Sources here said Capt Amarinder Singh had written to the Centre some time back about its inability to offer the fiscal concessions which was agreed upon when HPCL decided to set up the Rs 9,000 crore grassroots refinery.

In its communication to the Centre the Punjab Government argued that providing tax incentives would result in huge revenue losses and that it might not be a fiscally prudent move in the context of the border state’s delicate economy.

The sources said Punjab had cited the findings of a study carried out internally showing that the loss to the exchequer far outweighed the gains emanating from this project having a long gestation period. The overbearing opinion in petroleum circles is that the Punjab Government study was highly biased.

The Centre has instructed the HPCL Board to commission a study by a management consultant delineating the larger socio-economic benefits for the state that would eventually emanate from the project. HPCL is at present in the process of appointing the consultant. This study, as distinct from a commercial feasibility report, would be similar to a social cost-benefit analysis and lay down the broad contours in terms of objective development parameters.

Construction work at the project site had reportedly come to a halt in the wake of these developments. About Rs 277 crore had already been pumped in the mega project. In addition, Rs 3,000 crore was earmarked for constructing the pipeline linking up to the refinery site in Bathinda.

However, the sources said for the project to go ahead at full steam an assurance deed from the state government with regard to fiscal incentives was of critical importance and any further delay would only add to cost overruns.

In July this year Capt Amarinder Singh had gone on record indicating that his government could rethink on the project in the wake of the adverse fiscal implication that may accrue from continuing with the tax incentives.

Unless tax incentives were provided no refinery project could be commercially viable. This assumes importance as the current refining capacity in the country is far more than the existing demand.

In such a scenario, a refinery project for any company as a pure business proposition is unviable irrespective of its location. Against the petroleum product demand of around 103 million tonnes, India is flowing with a refining capacity of 117 million tonnes, the sources emphasised.

The BJP-led NDA government is of the view that notwithstanding the serious time and cost overruns that are characteristic of such capital intensive projects, the commissioning of such projects have a wider social objective in terms of employment generation, development of ancillary industries and infrastructure.

Analysts and experts said the Punjab Government’s recent opinion is in contrast to the position it had taken at the meeting of the National Development Council.

Earlier Capt Amarinder Singh had reportedly argued strongly in favour of the refinery projects on the ground of employment generation and other ancillary socio-economic benefits.

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