The Hindu Business Line : 7-year tax holiday removal may hurt refining projects

Impact on projects
IndianOil’s Paradip 15 mt refinery, HPCL’s 9 mt Guru Govind Sagar Refinery in Punjab and BPCL’s 6 mt Bina refinery which are under implementation are expected to be most hit.

Our Bureau

Kolkata, March 6 The proposed withdrawal of seven-year tax holiday beyond April 2009, if comes true, may pose a serious hurdle before the viability of almost all the upcoming domestic refinery projects.

Reliance Petroleum’s 27 million tonne (mt) refinery at Jamnagar, which is slated to be commissioned end of this year, however, may escape the heat.

Projects such as IndianOil’s Paradip 15 mt refinery, HPCL’s 9 mt Guru Govind Sagar Refinery in Punjab and BPCL’s 6 mt Bina refinery, which are under implementation, are expected to be most impacted. The fate of the future capacity expansion proposals of Essar’s Vadinar refinery is not known as yet.

Clarification awaited

While the refiners are eagerly waiting for further clarification from the Union Finance Ministry, IndianOil sources felt that the proposal if implemented may spell doom for the country’s prospect to emerge as a refining hub.

IOC has already started implementing the Paradip refinery project and physical commissioning was slated to begin as early as May-June following final project approval from the board of directors.

“Preliminary estimates suggest that the rate of return of the Rs 25-crore project may be impacted by 15-20 per cent.

“Overall, the return may be impacted by Rs 5,000 crore during the projected seven-year period,” a senior official told Business Line.

“This is a serious issue and needs threadbare discussion before going ahead with the project,” the official said, adding that the company had already sought requisite clarification from the Government in this regard.

Hinterland worse off

According to sources, hinterland refinery projects such as HPCL Bhatinda and BPCL Bina, which are currently under different stages of implementation, may be hit harder in case the tax benefits are withdrawn.

When contacted a BPCL official maintained that the company is yet to assess the impact and is still waiting for Finance Ministry’s clarification.

Meanwhile, ONGC has made it clear that they will take a re-look at their proposed greenfield refining projects at Kankinada, Mangalore and Rajasthan.

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