Reinvestment in NRL: A shrewd approach

Dr Navajyoti Borah (Associate Professor, Pandu College)

Bishaldeep Kakati (Lawyer, socio-political commentator. Can be reached at deep.kakati99@gmail.com)

Probably the Assam Government was sagacious enough when it recently decided to increase its stake with NRL from the existing 12.35% per cent to 26 per cent. The total financial involvement of the increased stake stands at Rs 2187 crore, out of which the government has already paid Rs 500 crore for enhancing its stake. However, the Assam Government's hopeful perspicacious decision regarding the increase of its stake in NRL can be understood by taking into consideration a few perspectives.

Martyred journalist-cum-rational thinker Parag Kumar Das in his book 'Swadhin Assamor Arthaniti' had a chapter included in it, which threw light to the fact that how Assam's oil resource could itself be a big factor in keeping Assam's economy strong and stable. Speaking of Assam, the Gross State Domestic Product (GSDP) of Assam is estimated to reach Rs 4.09 trillion in 2020-21. The GSDP of the state grew at a Common Annual Growth Rate (CAGR) (in rupees) of 12.58% between 2015-16 and 2020-21, inclusive of the fact that Assam has the largest economy in the northeast region.

If we flip over the pages of history, we would know that the NRL came into being as a result of a proposed refinery to be established in Assam, among the many demands that got enumerated in the Assam Accord. The refinery came into being on 9th July 1999 under the ministry of the then Prime Minister, Sri Atal Bihari Vajpayee. The entire episode of Assam desiring to increase its stake value in NRL started when in March last Bharat Petroleum Corporation Limited (BPCL) sold its entire 61.5% stake in NRL to a consortium of OIL and Engineers India and the Assam Government for Rs 9,876 crore. OIL brought a 54.16% stake to raise its shareholding capacity to 80.16%. However, the final exact percentage of stake value of OIL and EIL was dependent on the exact Right of First Offer (ROFO), which was to be exercised by the Assam Government. Therefore, in the final list of shares, the Government of Assam's share has been increased to 26% by reducing OIL's share.

The benefit of increasing the share value in NRL and also improving the overall infrastructure of NRL can be regarded as monumental, especially in terms of Assam's economy. This can be opined by taking into account the version forwarded by Assam's Cabinet Minister Chandra Mohan Patowary, after the end of the first Cabinet meet of the newly-formed Government of Assam on 11th May 2021. He stated that Assam till now had received dividends worth more than Rs 1,200 crore from NRL and by raising the stake value the state is expected to receive Rs 900 crore as dividends annually. If this turns out to be true then it would only augment the state's revenue. Further, NRL under is under the Ministry of Petroleum and Natural Gas, India. Therefore, an increase in stake value in NRL would also mean an increase in oil royalty in terms of State Share annually received from the Centre. But the only cause of concern that lingers is the fact that the Centre is yet to clear the previously accumulated oil royalty debt due to the state of Assam. It is also to be mentioned here that Oil India Ltd produces 3.2 million tonnes of crude oil in Assam annually, while ONGC Ltd produces 1.1 million tonnes of crude oil every year in the state. For doing the same, both OIL and ONGC have been paying royalty to the Centre and the State in terms of statutory provisions of oilfields (Regulations and Development) Act, 1948 and Petroleum and Natural Gas Rules, 1959.

NRL has always been a profit-making company and that can be understood by taking into account a few of its achievements during Quarter 4 (Q 4) of Financial Year (FY) 2020-21 and Financial Year (FY) 2020-21. In terms of capacity utilization, there was an increase of 15% in High-Speed Diesel Production as compared to the previous year amongst many others. If we speak of production efficiency, there was an increase of 0.36% in terms of Distillate Yield, higher than the MoU target of 86%. Further, if we confabulate NRL's marketing performance, a product sale of 2,764 Thousand Tonne (TMT) was achieved against the production of 2,741 TMT. Not to forget the fact that in terms of financial performance, NRL had a sales turnover of 18,227 crores and the highest ever contribution to the Central and State exchequer was made at Rs 6,468 crore during Financial Year (FY) 2020-21. Therefore, all these statistics are symbolic of the fact that probably Assam shall be highly benefited from its decision to increase its stake value in NRL.

Moreover, on 16th January 2019, the Cabinet Committee of Economic Affairs approved the Refinery's Expansion from 3 Million Metric Tonne Per Annum (MMTPA) to 9 Million Metric Tonne Per Annum (MMTPA). And when this project would be completed, NRL can further escalate its crude oil refining capacity, thus meaning Assam would not be required to send crude oil out of the state for refining as the government would be able to refine crude oil in the state itself. Added to this, NRL would also be able to refine crude oil of other states as well which would directly mean an inflow of revenue to the state.

NRL also produces a wide range of items like LPG, Naphtha, Motor Spirit, Aviation Turbine Fuel, Superior Kerosene Oil, High-Speed Diesel, Raw Petroleum Coke, Calcinated Petroleum Coke and Sulphur. Therefore, NRL can play a crucial role for thermal power plants in the process of generation of electricity, as thermal power plants often require fuel oil or natural gas apart from coal for the process. NRL can also help in providing petroleum gas to the Assam Gas Cracker Project currently known as Brahmaputra Cracker and Polymer Limited (BCPL) for the production of ethylene. Moreover, NRL can also enhance the production rate of essential fertilizers produced by Brahmaputra Valley Fertilizer Corporation Limited (BVFCL) by providing natural gas. Since BVFCL often depends on OIL for the delivery of natural gas.

In reality, the people of Assam still have emotions associated with NRL. And they were petrified when deliberations circulated regarding divestment of NRL. But Assam Government by increasing its stake value in NRL has not only stood tall upon the expectations of the indigenous Assamese people but also has strategically tried to further strengthen Assam's economy. The benefit of increasing the stake value in NRL might not be visible in maybe 5 or 10 years, but in the long run, it might surely come in as a big boost for Assam's overall development. Not to forget the fact that shortly pipeline delivery of LPG in every household of Assam might also turn out to be a reality with the proper utilization of NRL.