Barmer_Rajathan Refinery_projectsMonitor

Barmer_Rajathan Refinery_projectsMonitorEven though HPCL has decided to go ahead with 9 MMTPA refinery-cum-petrochemical complex project in Rajasthan, experts feel that the decision in favour of the project might have been taken due to political reasons rather than for any commercial considerations. The project, which is expected to go on stream in 2016-17, needs massive Rs 37, 230 crore investment and without any government support the refinery will yield an IRR of just 6.32%. Thus, states support is essential to make it viable. To make it viable, the Rajasthan state government has reportedly agreed to give an interest free loan of Rs 3,736 crore every year for a period of 15 years. Thus for the state government the project may become a white elephant, drilling a deep hole in its already stretched finances.

Further, the refinery and petrochemical complex will come up at a time when there will be a surplus in refining capacity in the country. HPCL feels that there may be excess refining capacity in the country as a whole but for the company its own production will fall much shorter than the projected demand for petroleum products in the region by 2016-17.

Initially the proposed project will be promoted by HPCL in joint venture with Rajasthan government where the state government will have equity stake not exceeding 26% and remaining with the former. The JV partners plan to rope in investors at a later stage.

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