The Vasundhara Raje government in Rajasthan is running from pillar to post to persuade the Oil and Natural Gas Commission (ONGC), not to shelve its decision to set up an oil refinery, near Barmer, for which it had agreed long back.
Sometime back, the ONGC sent a letter to the state government asking it to provide certain concessions and facilities. If Rajasthan government is not agreed to these concessions and facilities, the ONGC, may not be able to take up the project of setting up the refinery close to Mangla, where huge reserves of oil and natural gas were found three years back.
The British company Cairn Energy was given the contract, by ONGC, for oil exploration in the area. Three years back, it struck oil in many wells in Barmer and according to the preliminary estimates oil reserves in the area are about 2.5 billion tonnes. Initially Hindustan Petroleum Corporation Ltd(HPCL), had shown interest to set the oil refinery close to the oil pits. But with change in government at the Center, HPCL, for unknown reason, decided not to take up the project and said that it would set up an oil refinery at Bhatinda in Punjab
With the persuasion by the state government, ONGC, showed willingness to take up the project. It negotiated with Cairn Energy, which agreed to become partner in the project. Since Rajasthan government was also keen to become the partner, so a new Rajasthan Refinery, as joint venture, was formed. From ONGC side its 100 subsidy, Manglore Refinery and Petro Chemical Ltd, was made the partner in the company.
As per the project report, an oil refinery with the capacity of producing 70 lakh tonne of oil annually was to be set up near the oil pits. The cost of the project was estimated around Rs1000 crore. It was expected to be completed by 2009.
Few months back, ONGC sent a letter to the government saying that as part of concession package, it should exempt the oil, produced in the refinery, from the commercial tax for 16 years. This was a new term and it was felt that ONGC in the name of concession wanted to dictate term to the state government as ONGC has never sought similar concessions from the states, where it had set up the refinery. This concession alone amount to one and half time more than the cost of the project.
Initially, the commercial production of oil from the reserves was to start sometime in 2007. But owing to technical and some other reasons, now this would not be possible until 2008. The experts says, it would take at least five years to complete the refinery, so the ONGC came up with a plan to lay a pipe line up Mundra port in Gujarat to take the cured oil, produced in Mangla reserves, there. From Mundra it would be shipped to Manglore refinery. The ONGC says that this was a provisional arrangement to use the crude oil produced from the areas, till the refinery was set at Barmer.
But, government feel that, ONGC, most probably under pressure from UPA government, want to deprive the state from its first refinery. So now its more keen to lay the pipe than to set up the refinery. The concessions, sought by it, are so unrealistic that no state government could offer to it.
Ms. Raje took the Congress party into confidence and its leader agreed with the ruling BJP'smove to take up the issue with Prime Minister Manmohan Singh. They felt, since Raje was fighting for good cause, they should join hands with her in the interest of the state.
Since Rajasthan doesn'thave single major industry, the refinery would have change the economy of the state, as Rajasthan government was hoping to get about Rs 2,000 crore annually by way of taxes and other duties. The refinery would provide employment, direct and indirect, to about one lakh people. At the same time, number of ancillary industries are likely to come up, changing the economic scenario of arid west Rajasthan, which is most backward economically.
In fact, to accelerate the setting up of the refinery, the state government had already started the process of acquiring land and making arrangements for water and other facilities, needed for setting up this kind of huge project.
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