The union government has increased the foreign direct investment (FDI) limit in state-owned oil refining companies from the existing 26 per cent to 49 per cent, paving the way for steel baron LN Mittal to pick up 49 per cent equity in the Hindustan Petroleum Corporation Ltd refinery at Bathinda.
The Punjab government had approached the union government to enhance the FDI limit in public sector oil refining companies from 26 per cent to 49 per cent after the Luxembourg-based Mittal Investments signed an agreement with HPCL last year to become an equal partner in the Rs 16,000 crore refinery.
Punjab Chief Secretary Ramesh Inder Singh told Hindustan Times that the union government formally approved Mittal’s participation in the refinery a few days ago by raising the FDI ceiling.
Mittal will invest Rs 3,300 crore in the venture and will hold a 49 per cent stake in the special purpose vehicle set up for building the plant and laying a 1,100 km pipeline for bringing crude oil from Mundra port to the refinery.
HPCL will hold the remaining 49 per cent equity in the 9 million tonne refinery, while financial institutions will have a 2 per cent stake in the project.
The refinery project, which was earlier scheduled to be commissioned in 2003, will be completed by September 2010. The delay has resulted in a cost over-run of Rs 6,000 crore from the originally estimated Rs 11,500 crore.
The PV Narasimha Rao government at the Centre had cleared this refinery project, Atal Behari Vajpayee had laid the foundation stone during his stint as prime minister, and finally on Prime Minister Manmohan Singh’s intervention the state government offered the a new diluted package of concessions to HPCL.
Before entering into the joint venture with Mittal, HPCL on two occasions had failed to forge alliances with BP, Saudi Aramco, and Oil India.