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ONGC seeks sops for the Kakinada project

NEW DELHI: Demanding the same financial sops as those offered to the Special Economic Zones (SEZs) for its refinery projects, State-run Oil and Natural Gas Corporation (ONGC) has asked the Andhra Pradesh Government to provide land free of cost as well as fiscal incentives for setting up the Rs. 25,600-crore export-oriented refinery-cum-petrochemical project at Kakinada.

ONGC wants 950 hectares for the refinery free of cost and exemption from sales tax on sale of petroleum and petrochemical products, official sources said. It also wants fiscal concessions as given to an SEZ. Not only this, it has also understood to have asked the Andhra Pradesh Government to provide road and rail connectivity, develop sewage and refinery effluent disposal system and communication connectivity.

The slew of demands come despite the refinery capacity being raised to 15 million tonnes with ONGC maintaining that the project promised only 10.27 per cent rate of return that would become negative in the case of a 10 per cent rise in capital cost. ONGC’s subsidiary, Mangalore Refinery Petrochemical Limited (MRPL), is to hold 26 per cent stake in Kakinada Refinery Petrochemicals Ltd (KRPL), the company set up to implement the refinery project. IL&FS will hold 51 per cent stake and the balance will be with an Andhra Pradesh government-appointed agency.

Incidentally, the Hindujas have evinced interest in picking up a majority stake in the refinery project. Former ONGC chairman, Subir Raha, whose brain-child the project was, has joined the Hinduja Group recently.

Sources said ONGC had conveyed to the Government that it would proceed with the project only after getting confirmation for the incentives it had sought.

The estimated cost of setting up a 15 million tonne refinery with high complexity configuration stood at Rs. 25,000 crore, sources said.

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