The Bharat Petroleum Corporation Ltd (BPCL) is set to exit the Numaligarh Refinery Limited (NRL) by selling its entire stake to a consortium of the Oil India Ltd (OIL) and Engineers India Ltd (EIL) for Rs 9,876 crore, paving the way for privatization of India’s second-largest fuel retailer. The issue generated a lot of heat in Assam, with apprehensions about privatization of the NRL. However, in keeping with the Assam Accord of 1985, the Government ultimately decided to keep the NRL in the public sector. As part of the deal, the BPCL was to sell its entire 61.65% stake to State-owned firms. A consortium of OIL, EIL and the Government of Assam expressed interest in buying the stake and the BPCL board on Monday approved the sale. Under the agreement, the consortium is likely to acquire 49% and the rest 13.65% will be sold to the Government of Assam. The NRL operates a 3 million metric tonne per annum (MMTPA) oil refinery and currently the OIL holds 26% equity in the NRL while the Government of Assam has around 12.35%. The Assam Government now stands to benefit from enhanced revenue with the increase in its stake.
With the NRL expanding its capacity and diversifying its activities of late, the current developments should serve it in good stead in terms of further boosting its functioning. The Union Cabinet had two years back sanctioned a project for capacity expansion of the NRL from 3 MMTPA to 9 MMTPA. The project which involves laying crude oil pipeline from Paradip to Numaligarh and product pipeline from Numaligarh to Siliguri at a cost of Rs 22,594 crore needs to be expedited for time-bound completion. This will effectively meet the deficit of petroleum products in the Northeast besides sustaining the operations of all the refineries in the region by augmenting their crude availability. The NRL’s expansion had been long overdue, given that its refinery size at 3 million MMTPA was largely sub-economic even as it was witnessing a growing demand in its supply zone. Higher operating cost of the refinery too had been a concern in view of the import of limited quantity of crude oil. The Northeast has also witnessed a high growth rate of around 16% for motor spirit and 9% for high-speed diesel, pushing up the demand for crude oil. Given the Northeast’s strategic location sharing several international boundaries with Southeast Asian countries, the NRL needs to aggressively explore the prospects of exporting its refined oil to neighbouring countries and establish itself as a global player. While India’s oil exploration history can be traced to Assam over a century back, exploration, production and refining capacity have been well below the desired levels. Indeed, the petroleum industry in the country as a whole has been suffering from raw material, i.e., crude oil shortage. As the indigenous crude oil production has been much low compared to the total refining capacity, the industry has been depending heavily on imported crude.