A new year brings in new resolutions and this time around ONGC appears to have recommitted itself a refinery project in Kakinada, Andhra Pradesh, despite doubts about its viability. And over in West Bengal, the state government is determined to move ahead with a chemical hub at Nayachar.
ONGC’s resolution, however, appears to be a forced one - a result of political pressure from the Andhra Pradesh government. The government fears that ONGC’s absence from Kakinada will derail its plans for a mega chemical hub in the state.
ONGC had decided in 2006 that the proposed 7.5m tonnes/year refinery was unviable. But it has now been forced to undertake yet another study, this time for a 15m tonnes/year refinery. It is now bargaining for incentives such as 950 hectares of free land and sales tax exemption on petroleum and petrochemical products, free power and water supply during the construction phase and road and rail connectivity.
I would rather ONGC takes a firm stand against the project if it fails to provide adequate returns and instead focus its resources on more profitable opportunities. But that’s probably wishful thinking. The chemical industry certainly needs government support but not interfering politicians.
I have already had quite a few people posting comments on why the Kakinada project is needed, especially for the local economy. I don't dispute this. But my argument is that the project should be judged on its own merit especially if we are keen on making public sector units globally competitive. And surely offering free land is not in the interests of the local people.
In West Bengal, chief minister Buddhadeb Bhattacharjee started 2008 by forming a steering committee to oversee the chemical hub project at Nayachar. The hub will be developed over the next 15 years by Indonesia’s Salim Group.
Will it now be the turn of Buddhadeb to drag a reluctant public sector company to invest in Nayachar?