Will MNC refiners bite FDI bullet? - Views on News from Equitymaster

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Will MNC refiners bite FDI bullet?

Mar 24, 2000

The Hydrocarbon Vision 2025 has suggested inter alia allowing 100% foreign direct investment in refining. The paper is the work of the six think tanks which have been set up to suggest reforms in the oil and gas sector. This is the third policy paper the government has come out with. The first was the Sunderrajan Committee report (also popularly known as the R group) which recommended the dismantling of the Administered Price Mechanism (APM).

The second was the Nitish Sengupta Committee which was set up to recommend measures to protect stand alone refiners post abolition of the APM. This committee’s recommendations have however, been rejected by the government.

Apart from allowing 100% FDI in refining the paper had also set a requirement that only those companies which invest Rs 20 bn in either refining or oil exploration and production would be allowed marketing rights.

The fact remains that refining margins are under pressure and when India is witnessing an overcapacity situation in petroleum products it is difficult to visualise further investment in refining. It would be better for multinational companies such as Shell to bid for taking over existing refining and marketing companies in India rather than venture into setting up a grassroot refinery.

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