HPCL says decision on Rs 37,000-cr Raj refinery likely soon

Mumbai: A final decision on the much-delayed Rajasthan refinery, to be set up by Hindustan Petroleum Corporation for an estimated over Rs 37,000 crore, but has run into a political quagmire, is expected within a few months.

"A committee has been formed to look into the feasibility of the project. Our refinery director BK Namdeo is also a member of the panel, which is expected to submit the report in two to three months," HPCL Chairman and MD Mukesh Kumar Surana told reporters here last night on the sidelines of the AGM.

The UPA government had announced a 9-mmt refinery at Barmer in Rajasthan to be set by HPCL at an estimated cost of Rs 37,320 crore. From the start, the project had attracted criticism, which only increased after the Congress lost both the Central and State polls and BJP came to power in the state.

For HPCL, which has only two refineries at Mumbai and Visakhapatnam, the project would have been a big boost as its expansion projects are facing environmental issues.

The proposed refinery for which an MoU had been singed by the company and the then Ashok Gehlot government of the state, would use mostly the locally available Rajasthan crude, as well as other crude and will be designed to produce motor fuels.

Current Chief Minister Vasundhara Raje of BJP, who was not endorsing the agreement between the Gehlot government and HPCL, had been renegotiating the terms for setting up the refinery. Raje wants HPCL to bring down its internal rate of return to 12-13 per cent from 15 per cent targeted by the refiner.

The plan came after environmental issues threatened to derail HPCL's plan to set up a 9 mmt refinery in Maharashtra's Ratnagiri district.

HPCL, which plans to scale up capacity to 42 mmt per year from current 16 mmt, was to partner with Rajasthan State Refinery to set up the Barmer facility.

Surana said the company will invest around Rs 7,000 crore this year while the next five year's capex is planned at Rs 55,000 crore, most of which will be used for the expansion of its existing refineries. Out of this, Rs 20,900 crore are earmarked for the Visakhapatnam refinery expansion.

On retail expansion ahead of Reliance and Essar Oil planing a big play, Surana said being the second largest retailer with over 13,800 filling stations as of March 2015, the company has added 100 pumps in the first quarter and will be adding 500 more through the rest of the year.