NEW DELHI: Billionaire Lakshmi N Mittal and an IOCL company are formally opening a $4 billion (Rs 210.36 crore) refinery on the northern border with Pakistan as the countries that have fought three wars seek to stimulate trade.
Prime Minister Manmohan Singh is slated to inaugurate the plant on Saturday, a project of Mittal Energy Investments and Hindustan Petroleum (HPCL), the venture said in an e-mail.
The unit, which can process 9 million metric tonne a year of crude oil at Bathinda in the northern Punjab state, will help boost India’s exports and may open fuel sales to Pakistan, said Nisha Taneja, professor at the Indian Council for Research on International Economic Relations in New Delhi.
The project marks a thaw in relations between the nuclear- armed neighbors.India, which bars investment from Pakistan, is preparing to lift the ban and broaden their reconciliation. The two nations, which waged two of their wars over conflicting claims to the territory of Kashmir, have agreed in recent months to increase trade, expand travel across their frontier and grant more business visas.
“The refinery is the tangible asset that shows India is serious about trading with Pakistan and can help meet its demand for energy,” said Jagannadham Thunuguntla, a strategist at SMC Global Securities (GLBS) in New Delhi. “Robust trade is the basic building block of a healthier relationship between the two.”
India is ready to allow investment from Pakistan, India’s commerce minister, Anand Sharma, said April 13. This followed Pakistan’s cabinet approving a plan to dismantle tariffs on about 8,000 items for imports from India by December 31, with all restrictions being lifted by 2013, according to a February 29 statement from Pakistani Prime Minister Yousuf Raza Gilani.
The Bathinda project will be the first investment in crude processing by Mittal, chairman of ArcelorMittal (MT), the world’s biggest steelmaker. Mittal Energy has a venture with India’s Oil & Natural Gas Corp. (ONGC), which has offshore oil exploration blocks in Nigeria, according to ONGC’s overseas unit.
The plant used crude from Saudi Arabia and Kuwait for its trial production and will also import from Abu Dhabi, Iran and the spot market for regular operations, K Murali, director of refineries at Hindustan Petroleum, said by telephone on Friday. The refinery started processing oil in August and the entire project was commissioned “recently,” the venture said in a March 29 statement.
Hindustan Petroleum, majority owned by India’s government, operates a refinery in Mumbai that processes 6.5 MT a year of crude, and an 8.5 MT facility in Visakhapatnam in the southern state of Andhra Pradesh, according to its website. Pakistan allows imports of fuels including gasoline and diesel from India, after removing non-tariff barriers on November 2, Taneja said by phone on April 26. The distance between Bathinda and the Pakistani city of Lahore is about 100 miles.
Reliance Industries (RIL)’s refining complex, the world’s biggest, is located in Gujarat state, near the border with Karachi. “This refinery will bring a quantum jump in trade and economic relations and help the peace process,” Taneja said.