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Rajasthan to take 26% stake in Barmer refinery

New Delhi: The Rajasthan government plans to take a 26% stake in a refinery proposed to be set up in the state by Oil and Natural Gas Corporation (ONGC), reports PTI quoting oil minister Murli Deora.

The Rajasthan government has been pressing for a 9-12 million tonnes per annum refinery at Barmer ever since Cairn India found 6.5 billion barrels of oil reserves in the Thar Desert. The Barmer field can add 240,000 barrels per day (12 million tonnes per year) to the country's total oil production once plateau output is achieved.

“ONGC has informed that the government of Rajasthan has indicated to take up 26% equity stake in the proposed refinery,” he said in a written reply to a question in the Rajya Sabha.

The proposal for a wellhead refinery in Rajasthan was originally floated by ONGC, which owns a 30% stake in the Cairn oilfield. However, the state-run oil and gas giant had a change of heart after RS Sharma took over as chairman and managing director of the company in 2006 and has been demanding fiscal concessions from the state government before it embarks on the project.

“However, ONGC has informed that a decision on setting up of the refinery would be based on a detailed feasibility study and financial appraisal, bankable marketing agreement for offtake of products and adequate fiscal incentives from the state government to meet the viability gap,” Mr Deora said.

ONGC is in consultations with the government of Rajasthan on the feasibility of setting up a commercially viable refinery at Barmer, he said.

He said the state government “has indicated to take up 26% equity stake in the proposed refinery”, one of the conditions laid down by an expert group headed by former oil secretary SC Tripathi for making the project viable.

The state government is also in consultations with Indian Oil Corporation (IOC) and Bharat Petroleum Corporation (BPCL) for the sale of petro-products from the refinery, he said.

ONGC is not keen on the project unless the state government defers local sales tax or extends an interest-free loan of Rs1,300 crore per year for 16 years, gives free land and water, exempts crude oil from entry tax/cess/octroi and waives central sales tax for 16 years.

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Interest rates may go up with pick up in bank credit: ICICI

New Delhi: ICICI Bank, the country's largest private sector bank, today said there was pressure on interest rates following RBI intervention to check inflation and that loans may cost more with pick up in credit, reports PTI.

"There is an upward bias on interest rate. How they move up... to what extent they move up and at what rate they move up... will partly depend on how credit growth rate in the system picks up," ICICI Bank CEO and managing director Chanda Kochhar told PTI in an interview here.

The Reserve Bank of India (RBI) had earlier this month raised key rates at which it lends (repo) and borrows (reverse repo) short-term capital from commercial banks by 25 basis points in its bid to tame inflation.

"Clearly, the fact is that the liquidity is being managed tightly. The fact is that deposit cost have gone up and therefore as credit demand picks up there would be upward bias on interest rate," she said.

Asked if there is pressure on liquidity, she said, "There were some periods last year where we had excess liquidity. All that has gone. We are tightly managing liquidity."

Liquidity had also come under pressure owing to the huge public issue of Coal India Ltd a few weeks ago. Besides, a surge in spending during the festival season also put pressure on liquidity.

State Bank of India (SBI) chairman OP Bhatt too had said that interest rates were under pressure and might push up the rates.

"Interest rates have a slightly upward bias... (due to) liquidity combined with some more credit offtake, which is going to take place. So these two together may push up interest rates," Mr Bhatt had said.

Punjab National Bank (PNB) chairman and managing director K R Kamath too had said recently that banks might have to raise deposit rates to garner savings to meet the credit growth.

Increase in deposit rate raises cost of funds, eventually translating into higher lending rates.

RBI in its mid-year credit policy review earlier in the month raised the key short-term lending (repo) and borrowing (reverse-repo) rates by 25 basis points to 6.25% and 5.25% respectively to contain inflationary expectations. The central bank injects liquidity through repo operations and absorbs it through reverse repo.

To ease pressure on the banking system, RBI recently announced special liquidity easing measures, allowing banks to dip into their SLR (statutory liquidity reserve) portfolio by 1%.

According to the RBI's special measures, banks would be able to avail of more funds under the liquidity adjustment facility (LAF) for up to 1% more on their deposits.

"For any shortfall in maintenance of statutory liquidity ratio (SLR) between 9th November and 16th December, arising out of availment of this facility, banks may seek waiver of penal interest purely as an ad hoc, temporary measure," RBI had said in a statement.
 

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