06. Bathinda Refinery May become robbery on Punjab Treasury

By Harbans Singh Jalal, Ex MLA

(Note: This article was written on 1 January 2011, by Jalal. It is given here to expose Badal Shahi, who gave hug money to Mittal, whwere as Punjab holds not a single share in the refinary. )

 On Dec 11 at Phulokhari, Bathinda, Punjab Deputy Chief Minister Sukhbir Singh Badal said that Rs 20,000 crore Guru Gobind Singh Refinery undertaken by HPCL-Mittal Energy Limited (HMEL) is all set to change the overall industrial profile of Punjab.

Bikram Singh majithia also claimed this refinery, as a major claim of development. In literature of Punjab Govt, this refinery is claimed as the top achievement of Badal Govt.

On the other hand Captain Amrinder Singh former chief minister of Punjab, feels that this project is not useful for Punjab, but a burden on the state.

On Tuesday, 14 December 2010 Shiromani Akali Dal said that former chief minister Capt. Amarinder Singh, is trying to create scare, amongst the investors in Punjab.

It will be worthy to mention here that World's largest steel maker and the third richest man in the world, Lakshmi Nivas Mittal is the managing party in this project. 

As I remained member of Agriculture Price Commission of India, Director Indian Agriculture Statistical Research of Institute Pusa New Delhi, and Punjab Legislator, I had the opportunity to explore and analyze the statics and economy of India, specifically of Punjab State.

 And being the president of “Anti-Corruption Move” (Now named Punjab Anti-Corruption-Party) it may be my duty, to put true facts before public, about the burning topics of Punjab. Before saying a word about this, it will be logical to analyze the History of Bathinda Refinary, (GGSR or HMEL).

Before Bathinda refinery, there were a total of 18 refineries in the country, comprising 17in the Public Sector, one in the private sector, RPL, Reliance Petroleum Ltd, Jamnagar. RPL capacity is 33 MMTPA, (Million Metric Ton Per Annual) whereas, all other refineries in public sector, are less that 10 MMTPA). TOTAL Indian capacity is 127.37 MMPTA. Major oil importing sources for India are Saudi Arabia, Russia, the US, Iran, Iraq and the Emirates.

The Guru Gobind Singh Refinery project, was announced in 1995, Harcharan Singh Brar (Congress) was CM Punjab, and P. V. Narasimha Rao (Congress) was PM of India. 2000 acres of land was acquired in 1998. Atal Bihari Vajpayee laid the foundation stone in 1998, but later Planning Commission made move for scuttling the setting up of Bathinda Refinery Project on the pretext of its feasibility, size and cost.

Punjab Congress and Punjab intelligentsia was very much annoyed with this move of BJP govt, even The Punjab state council of Communist Party of India on June 14: 1998, has strongly condemned the move for scuttling the setting up of Bathinda Refinery.

The project was estimated to cost was Rs 9,806 crore and, in addition, Rs 2,500 crore were to be spent on a pipeline from the crude oil terminal at Mundra Gujarat, to the refinery site at Phulokhari in bathinda, on Haryana Border. A petrochemical complex was also planned to make use of the naphtha generated by the refinery. The 1006 km long pipeline was planned to be ready by March 2007, and the refinery was likely to go on stream in 2008-09.

It was decided, the refinery will be implemented by name of Guru Gobind Singh Refineries Ltd, a subsidiary of HPCL. HPCL was scouting for a partner for this company and was reportedly in dialogue with foreign companies like BP, Armco and Total etc. Later, British oil giant, BP (British Petroleum) was selected as partner.

It was decided that both HPCL and the foreign partner will have 26 per cent stake each and the balance will be given to the public. No doubt it was a Public Sector Project. Work on the 9-mmtpa project, known as Guru Gobind Singh Refineries Ltd, commenced in June 2001. About 806 hectares of land was acquired for the project. Rs 136 crores were spent on it.

The project includes the construction of a 9-mmtpa grassroots refinery with a 140-mw captive power plant. It would have a single mooring 1,006-km long pipeline from crude oil terminal at Mundra. The location for this was already been identified. Thereafter, the crude oil would be carried through the pipe line from Mundra to GGSR.

The total cost of the project was estimated at Rs 16,000 crore. Guru Gobind Singh Refineries Ltd was planned to issue optionally fully convertible debentures of Rs 900 crore and equity of Rs 100 crore, in order to fund the expenditure up to 2003.

It was decided that, HPCL will guarantee payment of interest and principal amount to debenture holders investing in the OFCDs. As per the Deed of Assurance, signed on August 12, 2005, during Captain Amrinder Singh as CM, state government agreed to grant interest free loan of Rs 250 crores per annum for first five years amounting to Rs 1,250 crore. It also offered exemption from electricity duty on generation of power for own consumption for 15 years from date of commencement of commercial production. State also agreed to share 50 per cent of infrastructure development cost for refinery, deferment of CST to the maximum of 300 per cent of fixed capital investment for 15 years.

It is to remember that all these incentives were going given to the Guru Gobind Singh Refinery as a proposed public sector project, not to M N Mittal or his HMEL. HMEL was not still entered.

British Petroleum had signed the letter of intent on October 13, 2005 with the Indian PSU to form the JV to set up the USD 3 billion project. On 15 August 2005, much-delayed 9 mmtpa Bathinda refinery has finally started. On march 24 ,2006 '' British Petroleum has conveyed that they are not investing in the joint venture project in Bathinda refinery project, but added “Prize Petroleum, a joint venture company, is in the process of raising private equity for funding the ongoing E&P initiatives''. (Prize Petroleum company Ltd (PPCL) public Sector Enterprises owned by the Government of India.

HPCL holds 50% of the equity share capital, the balance being held by ICICI Bank, ICICI Ventures and HDFC Bank, After it, HPCL said in a release, “The discussions with prospective investors are in progress and the response is encouraging”.

World's largest steel maker and the third richest man in the world, Lakshmi Nivas Mittal was born on June 15, 1950 at Sadulpur, in Churu district of Rajasthan. At that time, L N Mittal had entered the energy sector by forming a joint venture with Oil and Natural Gas Corporation (ONGC) of India to invest in E&P assets in selected countries. This joint venture, ONGC-Mittal Energy Limited (OMEL) had oil and gas assets in Syria and Nigeria, partnered with TOTAL of France.

He did not shown any interest to enter into SGGS refinery Bathinda, in 2006, when British Petroleum drawn from it, and HPCL was in search of partner

The India-born billionaire has already pulled out of HPCL's proposed USD 6-billion refinery-cum-petrochemical project proposed at Vizag in Andhra Pradesh.

On 1st March, 2007 S Parkash Singh Badal became the CM of Punjab. Probably, In mid March, Mittal incorporated its subsidiary, “Mittal Energy Investments Pte Ltd”, in Singapore. As a result of joint efforts of PS Badal and L N Mittal, they successfully approached the ministry of petroleum of India.

On Wednesday, 25 July 2007, Punjab Chief Minster Parkash Singh Badal accompanied by Sukbir Badal and Steel Baron Lakshmi Narain Mittal met Union Petroleum Minister  Murli Manohar Deora's at his office, and asked him for expeditious execution of  this prestigious project by December 2010. Shri Arun Balakrishnan, C&MD of HPCL handed over a share certificate to Shri L N Mittal, founder and Chairman of Mittal Investments S.a.r.l, in the presence of Shri Murli Deora, Minister of Petroleum and Natural Gas.

Investment by Mittal is only 500 crores, in 18,000 crores project. Mittal Group presented a cheque for Rs. 500 crore as part of their equity contribution in the JV company, Guru Gobind Singh Refinery Ltd (GGSRL). This marks the formal participation of MI through its 100% subsidiary Mittal Energy Investments Pte Ltd. as joint venture partner of HPCL in GGSRL. Bathinda in Punjab.

Mittal investments planned to acquire the stake in the refinery for Rs 3,365 crore through its wholly owned subsidiary Mittal Energy Investments Pte Ltd, incorporated in Singapore. The Cabinet approval was required since current government policy restricts FDI in public sector petroleum refineries, to up to 26 per cent. HPCL and Mittal will hold 49 per cent stake in the Rs 17,973 crore Bathinda refinery project, while the balance 2 per cent would be allocated to financial institutions. The project was to be financed in 1.5 :1 debt-equity ratio.

Later, Shri Mittal praised the Government for giving expeditious approval for the JV project He informed that they signed the JV agreement in March 2007 and by June 2007, the approval was granted.As a result LN Mittal became 49% shareholder in an upcoming 9-MMTPA Greenfield refinery at Bathinda, being implemented by HPCL.

To strengthen their ties further, Badal asked Mittal to come to Punjab for discussions, for further joint ventures. Mittal acceded to the request of Badal to visit Punjab soon and explain opportunities for further investment in other projects. September 1, 2007, HPCL & Mittal Energy meet Punjab CM to discuss Bathinda refinery and other proposals, at Chandigarh.

A 18-member team of Hindustan Petroleum Corporation Ltd (HPCL) along with the representatives of Mittal Energy Investments Pte. Ltd, Sudhir Maheshwari met Punjab Chief Minister Parkash Singh Badal to discuss about the 9 million tonne refinery. Shri Mittal praised the Government for giving expeditious approval for the JV project He informed that they signed the JV agreement in March 2007 and by June 2007, the approval was granted.

Chief Minister of Punjab Shri Prakash Singh Badal called on Shri Murli Deora and conveyed that the State Government will extend full support to the project. During their meeting the Minister of State for Petroleum and Natural Gas Shri Dinsha Patel, Petroleum Secretary Shri M. S. Srinivasan, Shri L N Mittal, founder and Chairman of Mittal Investments s.a.r.l(MI), Shri Arun Balakrishnan, C&MD, HPCL, senior officers of Petroleum Ministry, Government of Punjab, HPCL, Mittal Investment, etc were present.

It was decided that, HMEL shall plan, design, construct, commission and operate an energy efficient and environment friendly Greenfield refinery at Bathinda, Punjab along with associated infrastructure facilities. The company shall endeavor to achieve excellence in all aspects of project management while successfully implementing the project within the scheduled time, (Dec 2010) budgeted cost and desired quality standards.

It was said, the HMEL Refinery will be a zero bottoms, energy efficient, environment- friendly, high distillate yielding complex refinery that will be producing clean fuels and polypropylene by processing heavy, sour and acidic crudes.

As part of this project, Name changed from GGSRL to “HMEL” On November 14, 2007. The Board of Guru Gobind Singh Refineries Ltd in its meeting in Mumbai, approved changing name of the company from “Guru Gobind Singh Refinary” to “HMEL” (HPCL-Mittal Energy Ltd), company sources said. Board also appointed Union Govt-run “Engineers India Ltd” as Project Management Consultant for the refinery.

On Dec 7, 2007. Billionaire Lakshmi N Mittal, changed the name of the company implementing the Rs 18,919 crore project from Guru Gobind Singh Refineries Ltd to HPCL-Mittal Energy Ltd. As he was picking 49 per cent stake in Hindustan Petroleum Corp Ltd's Bhatinda refinery. At Chandigarh, corporate decision to drop the name of Guru Gobind Singh from a refinery evoked sharp reaction. Terming the name change as being in "bad taste," Punjab Cooperative Minister and General Secretary of Shiromani Akali Dal, Kanwaljit Singh said: "This changing of name from Guru Gobind Singh Refineries Limited to HPCL Mittal Energy is wrong and I strongly condemn the same. The decision is in bad taste and Punjab government will take up the issue with the Centre”.

But CM Punjab PS Badal and his son Sukhbir Singh, kept their lips closed, and consented with Mittal. However on July 4, 2010, reacting to a report published in a section of the media. The Punjab Government denied that the name of Bhatinda Refinery Project has been changed to HPCL-Mittal Energy Limited. a government spokesman said the earlier name of the refinery, which has been named after 10th Sikh guru, Gobind Singh, will be retained. But legally statement of govt spokesman has no value, until company itself, do not change its name, by lawful process.

Falshood of Punjab Govt is proved from the press news on Sep 9, 2009, that Punjab CM as Chairman of GMADA allotted 3242.8 square yards, of plot in sector 79 of Mohali allegdly to the Batinda refinery, but on the name of “HMEL”, not on the name of “GGSR”.

Mittal threatens to stop Bathinda refinery work Mar 30, 2009, 23:37 Steel czar Lakshmi N Mittal threatened to stop work unless the state government restored the fiscal incentives, which were scrapped a few years ago by the previous Capt Amarinder Singh government. ( Fiscal incentives during Captain Amrinder Singh govt were promised to a Public concern GGSR, presumed to be held by HPCL and British Petroleum Ltd, but not to HMEL held by L N Mittal)

Mittal earlier wrote to Prime Minister Manmohan Singh demanding fiscal concessions at par with what the Madhya Pradesh government has given to the Bharat Petroleum-promoted, Bina refinery project. (However demand was not very relevant, as Bina Project is a Public Sector Project held by BPCL. BPCL holds a 74% stake in the refinery and OOCL holds the remaining 26%.)

Losing a fortune in the global economic meltdown, as per press reports, Mittal had contemplated quitting the project altogether, but had been persuaded to stay on with the promise that the He would convince the Punjab government to restore fiscal concession. Without the fiscal concessions like sales tax waiver on fuel it produces, the landlocked refinery was not viable and Mittal is not wanting to put more funds beyond the initial Rs 500 crore he had paid for equity, they said.

On the other side, Oil Minister Murli Deora said “State-owned fuel retailers IOC, BPCL and HPCL are likely to lose Rs 65,000 crore on selling diesel, domestic LPG and kerosene below cost during the current fiscal”.

HMEL had reasoned before the state government that the refinery was located at a great distance from sea ports which would cause increase landed cost of crude oil and cost of its marketing, thereby making the refinery less competitive to other refineries.

On 9 September 2009, HMEL officials told the Punjab government that the pipeline’s annual carriage capacity, initially envisaged at 9,000 million tonnes, is being doubled to 18,000 million tonnes. “This was being done to expand the refinery into Asia’s biggest petrochemical hub”, HMEL officials said.

HMEL chairman Arun Balakrishnan and chief executive Prabh Das met Punjab Chief Minister Parkash Singh Badal and other top officials of the state government. Das said apart from the Rs.18,900 crore initial outlay for the refinery, an additional Rs.5,000 crore was being spent on the Gujarat-Bathinda pipeline and another Rs.1,000 crore on an offshore port for importing crude oil from Iraq, Iran and Saudi Arabia.

Status of Project as of 31th December, 2010.

The Mittals had recently arranged Rs 7,793 crore from a consortium of 26 lenders to fund the debt portion of the project. The project is being financed in 1.5:1 debt-equity ratio. Number Of Companies Having IPO In Pipeline on 03/8/2010 According to the PRIME Database the State Bank of India led consortium of 26 lenders following companies in which the Central /State Governments / Government Companies / Government Financial Institutions, have some shareholding, or have their Initial Public Offering (IPO) in pipeline.

The companies are Damodar Valley Corporation, Eastern Investments Ltd., FCI Aravali Gypsum & Minerals India Ltd., Guru Gobind Singh Refinery Ltd., National Highways Authority Of India, New India Assurance Co. Ltd., The Oriental Insurance Company Ltd., Prasar Bharati Broadcasting Corp., Proseal Closure Ltd., SBI Funds Management Private Limited and United India Insurance Co. Ltd. Future ambitions of Mittal

On July 05, 2007 it was said that, Guru Govind Singh Refinery Ltd (GGSRL), plans to raise $1 billion in foreign borrowings, that was equivalent to INR 35 Arab, over four years to fund the project. The company is in the process of firming up Rs 8,000 crore loan from a consortium of 26 banks led by State Bank of India for the project.

On February 18, 2010, it was said that, The Lakshmi Niwas Mittal group companies in India are looking to raise USD 400 million via external commercial borrowings. Sources say HPCL Mittal Energy (HEML), is looking to raise USD 200 million for refinery at Bathinda, and HMPL, which is an HMEL subsidiary, is looking to raise USD 200 million via ECBs to lay a pipeline from Kandla to Bhatinda. SBI will take the issue to the markets in two-three weeks, it is learnt. The tenure for both issues, sources said, was for six years and the companies hope to get funding at a rate of LIBOR + 425 basis points (4.25%).

It is now also said that Lakshmi N. Mittal and HPCL are planning to sell 10% stake each in the Bhatinda refinery, through an Initial Public Offering (IPO). The IPO is likely to take place around March 2011 to April 2011 and is expected to raise INR 10 billion to INR 15 billion.

Now, HMEL is seeking from Punjab Govt. Manpreet, who as finance minister was leading the high level committee set up by the Punjab government in 2007 to talk to the refinery authorities, said, “Our committee had numerous meetings with the refinery authorities. But at no point, could they give us a convincing argument as to why these extra concessions should be given.” He added that the argument given by the refinery authorities that more concessions need to be given in view of the global downturn post-2008 autumn was disingenuous.

The incentives sought by the refinery authorities include an interest subsidy for a period of 15 years, funding of 100 per cent interest cost for investment made in petrochemical units and a soft loan of Rs 1,000 crore.

As per other sources, Rs 400 crore per annum as interest free loan for the first 15 years from 2011-12 to 2025-26 which is to be paid back per annum from 16th year-2026-27 onwards for the next 15 years.

Now they are demanding a total interest-free loan amounting to Rs 6,000 crore,” plus other incentives offered on 12 august 2005, by Amrinder Singh Govt. (It will be logical to repeat here, that all these incentives were being given to the GGSR (Guru Gobind Singh Refinery) as a proposed public sector project, not to M N Mittal or his HMEL Singapore, as a private JV. HMEL was not still born.

At present, the state government has offered an incentive of Rs 250 crore per year interest-free loan to the Mittals for five years, and some other incentives.

HMEL will produce the following products Liquid Products : Those will be marketed by HPCL are Motor Spirit, High Speed Diesel, Superior Kerosene Oil, Aviation Turbine Fuel, Liquefied Petroleum Gas, Naphtha, Hexane, Mineral Turpentine Oil. Solid Products : Those will be marketed by Mittal Energy Pvt Ltd are Polypropylene, Pet Coke, and Sulphur.

Estimated Composition of Crude Oil is as: Premium Petrol 15%, Regular Petrol 15%, Jet, DPK 15%, Diesel 30%, Fuel Oil 10%, Bitumen 3%, Sulphur 2%, propene gas for PolyPropylene and loss 10%.

Average liquid product price is, Petrol 58,000/ KL. Diesel 36000/ per KL. Kerosene 31000/ per KL. Naptha 43,000/ per KL. Furnace Oil 28,000/ MT. Bitumin 28,000/ MT. Hexan 39,000/ KL. HSD 31,000/ KL. Polypropylene Rs 84,000 per MT, Pet coke Rs 25,000/ per MT, Sulphur Rs 8,000/ per MT, Punjab Has no gain from HMEL Refinary

HMEL will need to procure a large number of goods and services in the near future. Engineers India Limited (EIL) is managing the engineering, procurement and construction for the refinery project. Vendors are invited to register with EIL. EIL is working under the administrative control of Ministry of Petroleum and Natural Gas (MoP&NG), Government of India. There is no 15% priority for Punjab products. Punjab Govt and industry is nothing to gain from it.

Punjab has no nominee neither in board of directors nor in management. On the other hand, factory is located on the border of Haryana. Said number of labour is about 30,000, mostly from Rajstan, Haryana, UP and Bihar. There are a few labour from Punjab. In the present official web site of HMEL, only one sikh is seen, where as location of refinery is in area, that is totally abundant by Sikhs, in turban form.

Safety measures are so loose at refinery, that many deaths, accured in few months, over 50 were injured. All immunities are provided by Punjab Govt and Mittal is providing deaf ear. On December 20, 2010, Public Relations Officer Waheguru Pal Singh added that three ambulances are placed in the campus to rush them in the nearby hospitals in any serious case.

Rama Mandi and Talwandi, in Bathinda, which are located 12 km and 40 km from the refinery site, for the safety of workers we provide them height safety belts, helmets of good quality and pair of boots. In the starting of the winter new jackets and quilts have been distributed these workers. After the incident, we immediately rushed them to the hospital where all died. Compensation has been given to their family members by Punjab Govt," said Singh.

Nutshell, approximate value per year of incoming crude oil and other related items will be more than Rs 30,000 crores and value of finished liquid and solid outgoing products will be about Rs 40,000/ crores. It calculates that different taxes may be between Rs 5,000/ crores to Rs 10,000/ crores per year. On the calculation of fifteen years it becomes Rs 75,000/ crores to 150,000/ crores. Compound interest for fifteen years on Rs 6,000 crores, becomes about 20,000 crores.

Calculating all these, Mittals are asking from Badals, to give incentives totaling Rs 100,000/ crores to 150,000/ crores, on the price of loss to Punjab. That is double than the total debt on Punjab. It is a token of the “Seva” by P S Badal, and “Vikas” of Sukhbir Singh Badal, towards Punjab.

Solution If Badal Govt is sincere to Punjab, that can take over issued shares to Mittal, that are only worth 500 crores. Market value of these shares now, is assessed to low. By paying such small amount, State Govt will be owner of the project. In such position state govt can request to central govt to restore the production of Heavy-Water, that was suspended some time back, due to some regional security problems, and installation of modified nuclear reactor, for production of electricity, to be utilized in refinery and other distribution for Industry and agriculture.