The Hindu Business Line : Cairn yet to get ‘right of use’ for Rajasthan pipeline

New Delhi, Oct. 9 Cairn India, which aims to pump out oil from its Rajasthan fields in a year’s time, has run into fresh trouble, this time with the Rajasthan government. The latter is yet to grant the crucial Right of Use (ROU) for the part of the pipeline that will pass through the State.

There are two issues that have upset the State government. First, the pipeline makes the proposed refinery in Rajasthan redundant and second, the shifting of delivery point for the crude from Rajasthan to Gujarat where the pipeline terminates, could lead to loss of sales tax revenues for Rajasthan.

Letter to CM

The Cairn India MD and CEO, Mr Rahul Dhir, wrote to the Chief Minister, Ms Vasundara Raje, offering the crude produced by the company in Rajasthan to the proposed refinery when it comes up. The pipeline could be used to import crude for the refinery as the Rajasthan oil fields’ peak production will only be 7.5 million tonnes per annum for a period of 7-10 years only.

On the sales tax issue, Mr Dhir said in the letter, a copy of which is available with Business Line, that Cairn would effect the sales in Rajasthan and ask buyers to set up a branch office there for the purchase of crude oil.

Mr Dhir pointed out in the letter that the Union Petroleum Secretary had written to the Chief Secretary of Rajasthan confirming that there should be no loss to the State government due to shifting of the delivery point.

The Rajasthan government will earn over Rs 5,500 crore a year through royalty from the project. In addition, Cairn will also pay Rs 4 crore a day as royalty for use of the pipeline.

Seeking a meeting with Ms Raje (which has not been granted yet), Mr Dhir said in the letter dated July 30: “ …we request you to instruct the Competent Authority to process our applications for the ROU urgently. Any further delays will have a disproportionate impact on the start of oil production in Rajasthan with an adverse impact on all stakeholders.”