HPCL is the loser in Rajasthan refinery complex tug-of-war

Murali Gopalan Mumbai | Updated on January 15, 2018

PM Narendra Modi to do the honours in ‘commencement of work’ function today

It was in 2013 when the foundation stone was laid for Hindustan Petroleum Corporation’s Rajasthan refinery-cum-petrochemical complex. Tuesday will see an encore happening with Prime Minister, Narendra Modi, doing the honours in a ‘commencement of work’ function.

The biggest loser during these five years has been HPCL which should have ideally had the 9-million-tonne refinery up and running by now. It would have been an important part of its plans to increase refining capacity by the end of this decade.

On the contrary, little has been achieved since 2013, and HPCL will have to stay content with 15 million tonnes from its Mumbai and Visakhapatnam refineries. Beyond these wholly-owned projects, it is a joint venture partner with the LN Mittal Group for the 9-mt Bhatinda refinery. Likewise, it has 17 per cent in the 9-mt Mangalore Refinery & Petrochemicals (MRPL) where Oil and Natural Gas Corporation (ONGC) is the lead partner with a 72 per cent stake.

Political slugfest

“All this puts in context why the Rajasthan refinery was so important to boost HPCL’s self-sufficiency levels,” says a source familiar with the developments. On the contrary, it has now become the centre of a slugfest between the ruling BJP and the Congress.

After all, the first round of the foundation laying ceremony was done during the UPA-2 regime. Rajasthan was then part of a Congress-led government, while the BJP is now at the helm of affairs. The fact that the State is heading for elections later this year also puts in perspective the importance of the refinery in terms of showcasing an important project.

Yet, it will be another five years before this becomes a reality, and perhaps, even longer, should other delays crop up along the way. After all, HPCL is also going through a change in ownership with ONGC preparing to buy out the Centre’s 51 per cent stake. There is no telling if the Rajasthan refinery will remain priority at that point in time.

As part of the stake-sale process, HPCL is tipped to buy out ONGC’s share in MRPL which will then enhance its own refining capacity by a good nine mt. More importantly, the results of the assembly elections in Rajasthan could delay commissioning of the refinery even further.

“It’s a real pity if this happens. Five years ago, all the approvals were in place to get work started quickly. Now, it is back to square one,” adds the source. Further, there were plans to have experts from the Bhatinda refinery help out with the Rajasthan project. Whether this can be replicated remains to be seen.

Eventually, the idea was to supply petrol and diesel from both Rajasthan and Bhatinda to key markets in Uttar Pradesh using Rewari in Haryana as the pipeline hub. In the process, HPCL would not have had to depend on products from other refining companies to feed its distribution network.

West Coast refinery

This also explains why Rajasthan took precedence over the 9-mt West Coast refinery which was initially planned as an alternative to the decades-old facility in Mumbai. With land in place along with other approvals, the HPCL leadership team was confident that the Rajasthan project would be completed faster.

It is, of course, another matter that the Centre has now planned a gigantic refinery on the West Coast with a capacity of 60 mt. Indian Oil Corporation will be the largest shareholder with 50 per cent equity, while HPCL and Bharat Petroleum Corporation will take up 25 per cent each.

Whether this will be commissioned ahead of the comparatively smaller Rajasthan refinery is the million-dollar question. By the end of the day, it is HPCL that is now on the back foot with ONGC more likely to call the shots in the future.

Published on January 15, 2018

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