ONGC stresses on tax sops for investment in Rajasthan project

NEW DELHI: Petro major Oil and Natural Gas Corporation (ONGC) is unlikely to invest Rs 8,000 crore in the proposed Rajasthan refinery project despite the mounting political pressure.

ONGC has made it clear that a refinery could be commissioned in Barmer (Rajasthan) only if the state government was willing to extend large scale fiscal incentives.

It is learnt that the state government has refused to accept ONGC’s demand for a 15-year sales tax exemption. ONGC chairman RS Sharma said that setting up a refinery in the state was not economically feasible unless the state chipped in with huge fiscal sops.

“When we said that we would set up a refinery in the state, we had also mentioned that the project would be undertaken only after due diligence. Various economic and financial viability studies show that the project is not economically viable, unless large scale fiscal incentives are extended by the government to the project.”

Mr Sharma was addressing a press conference after the annual general meeting of the company. Mr Sharma said that the company is planning to get its subsidiary Mangalore Refinery and Petrochemicals (MRPL) de-nominated as the official offtaker of crude oil found by Cairn Energy in Rajasthan. “We are discussing alternatives with Cairn Energy, which include selling crude to refiners like Reliance or Essar Oil,” he said.

A proposal of Cairn Energy of building up a pipeline to evacuate the crude to a refinery is also being considered. Cairn has a 70% stake in the oilfields, while ONGC has a 30% ownership.

On ONGC’s relations with steel major Mittal Steel, Mr Sharma said that the companies shared a very cordial relations. “We are working together well,” he said. On September 6, the board of ONGC decided to issue a letter of comfort to Mittal Steel regarding their oil and gas trading joint venture ONGC-Mittal Energy Services (OMESL).

Mittal had expressed concerns over delays in formalising OMESL. Disclosing its plan to import liquefied natural gas (LNG), Mr Sharma said ONGC would like to import up to 10m tonnes of LNG a year once its petrochemical plants at Mangalore and Dahej are ready.

Mr Sharma also informed that ONGC’s arm MRPL is planning to raise about Rs 5,200 crore debt to part-finance the expansion of its refining capacity. “The project would be funded in a debt-equity ratio of 2:1. The initial capital requirement would be from internal accruals and about Rs 5,200 crore debt would be raised sometime in ’08,” MRPL director (finance) LK Gupta added.