The decision to allow 49 per cent foreign direct investment (FDI) in public sector refineries through joint ventures by automatic route from the current 26 per cent is expected to open up avenues for the government to seek partners for its new planned refining projects.
The state-owned refineries, which have been hard pressed for funds due to losses suffered by selling petrol, diesel, kerosene and LPG below cost, could get a breather through FDI investments in refineries.
Steel baron LN Mittal had last year acquired a 49 per cent stake in Hindustan Petroleum Corporation Ltd’s (HPCL) 9-million-tonne greenfield refinery at Bhatinda for Rs 3,365 crore. However, the decision had to be approved by the Cabinet Committee of Economic Affairs. The Rs 18,919 crore Bhatinda refinery is scheduled to be commissioned by 2011.
Singapore-based Mittal Energy Investments Pte Ltd, a subsidiary of Mittal Investments Sarl, Luxembourg, has already paid the first instalment of Rs 500 crore.
The government allows 100 per cent foreign direct investment in exploration, refining and pipelines. However, until now 26 per cent FDI was permitted through the automatic route.
Mittal has evinced keen interest in taking a 20 per cent stake in state-run Bharat Petroleum Corporation Ltd's Rs 9,100-crore, 6-million-tonne Bina refinery that is set for commission by 2010-11.
The billionaire non-resident Indian has also shown keenness to invest in HPCL’s proposed greenfield 9-million-tonne refinery-cum-petrochemical complex at Vishakhapatnam.
HPCL is also talking to France's Total, state-run gas firm GAIL (India) and public sector exploration and production company Oil India for a possible four-way partnership in the Rs 25,000-30,000-crore project.
The government also decided to waive the condition of divestment of 26 per cent equity in favour of Indian partners or public within 5 years of entering trading and marketing of petroleum products.
This would enable the foreign retail marketing companies the option to choose the time of its preference to divest stake for raising capital whenever required. However, the ceiling of Rs 2,000 crore minimum investment would be retained to prevent fly-by-night operators.