The Hindu Business Line : Cabinet allows Mittal to pick up 49% stake in Bhatinda refinery

One-off case
Govt gives special permission to the Mittal-HPCL venture.
Proposed investment breached the overall investment cap of 30% and the Rs 1,000-cr limit in one project.

New Delhi June 21 The doors have been opened for steel baron Mr L.N. Mittal to enter into India's petroleum refinery sector. The Union Cabinet on Thursday has given its nod to a proposal to allow Mittal Group to pick 49 per cent stake in Hindustan Petroleum Corporation Ltd's, Guru Gobind Singh Refineries Ltd (GGSRL) at Bhatinda.

However, this is a one-off exception and the overall policy of allowing only 26 per cent foreign direct investment in public sector refineries continues to be in operation.

Under the current norms, 100 per cent FDI is permitted under the automatic route for private refining companies, but for public sector units, only up to 26 per cent is permitted.

But, based on the Petroleum Ministry's recommendation for this specific joint venture proposal, the Cabinet permitted induction of the Singapore-based Mittal Energy Investments Pte Ltd (MEI) as a 49 per cent partner in Bhatinda refinery project. MEI is a 100 per cent subsidiary of the Luxembourg-based Mittal Investments Sarl. The project is being executed by GGSRL, currently a 100 per cent subsidiary of HPCL.

The Cabinet has also given its approval for special permission to HPCL to form this joint venture with MEI as the proposed investment breached both the overall ceiling of 30 per cent net worth limit and a maximum of Rs 1,000 crore in one project as prescribed under the Department of Public Enterprises norms.

HPCL and Mittal will contribute Rs 3,506 crore each for 49 per cent equity and balance 2 per cent equity of Rs 143 crore will be taken by Indian financial institutions. The investment by Mittal Investment of Rs 3,506 crore (or about five per cent of total FDI in 2006-07) is the largest FDI brought into the petroleum refining sector in collaboration with a PSU.

The `as built' cost of the project assessed by SBI Caps is Rs 18,919 crore.

CCEA had earlier given its nod to the project with permission to induct joint venture partner, if so required subsequently.

It consists of a 9-million tonne per annum (MTPA) refinery, crude oil pipeline from Mundra to Bhatinda and crude oil terminal at Mundra. The project is to be ready by September 2010.

The Petroleum Minister, Mr Murli Deora, said, "the project which has been hanging for last seven to eight years will soon see the light of the day with this decision."

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