NRL’s PSU Tag Safe: Need to Sustain Growth

Swakkhyar Deka

(The author can be reached at swakkhyar@gmail.com)

It came as welcome news for the people of Assam with the central government’s announcement on Wednesday that Numaligarh Refinery Limited (NRL) will remain under government control and will not be privatized — even as the government approved strategic disinvestment in Bharat Petroleum Corporation Limited (BPCL) along with Shipping Corp of India, Concor and THDCIL while retaining management control.

“The Cabinet has approved strategic disinvestment in BPCL excluding its stake in Numaligarh Refinery. Numaligarh Refinery is to be carved out of BPCL before the latter is privatized and will be taken over by another public sector company,” Finance Minister Nirmala Sitharaman said.

The refinery is owned by Numaligarh Refinery Limited (NRL), a joint venture between Bharat Petroleum (61.65 per cent), Oil India (26 per cent) and Assam government (12.35 per cent). The Cabinet Committee on Economic Affairs (CCEA) approved the sale of government’s entire 53.29 per cent stake along with transfer of management control in the country’s second-biggest state-owned refiner BPCL after taking out Numaligarh Refinery.

Credit must be given to Chief Minister Sarbananda Sonowal who had written a letter to Centre in October last when reports were doing the rounds about handing over of BPCL to a private player and the consequent private investment in NRL wherein BPCL is the largest shareholder. Subsequently, Sonowal also conveyed to Prime Minister Narendra Modi about the NRL’s importance for the people of Assam when he called on him at New Delhi.

The development must be put in perspective with a major decision regarding the PSU in the recent past. The CCEA had in January approved the capacity expansion of Numaligarh Refinery of Assam from 3.0 MMTPA to 9.0 MMTPA with estimated total project cost of Rs. 22,594 crore. Staring from 2020, the project is expected to be completed by 2023. It is the highest ever investment proposal in the North East in the last 70 years.

The expansion project is expected to contribute significantly in meeting the growing demands of petroleum products in North East and Eastern India and ensure crude oil security. It would also act as a prime mover for other projects envisaged in the NE Hydrocarbon Vision 2030 and is expected to enhance export of petroleum products to the neighbouring countries such as Myanmar, Bhutan and Bangladesh capitalising on Act East Policy.

The project includes simultaneous laying of over 2,000 km of pipeline for transporting imported crude oil from Paradeep port in Odisha to Numaligarh and then to facilitate evacuation of products from Numaligarh to Siliguri in West Bengal, making NRL an active player in the midstream section.

At the 26th Annual General Meeting held in August this year, North East India’s largest refinery had reported the highest ever revenue from operations of Rs 18,511 crore during 2018-19 (FY 19), registering a growth of 16.25 per cent over the previous year with net worth of the company at the end of 2018-19 (FY19) reaching Rs. 5,551 crore which underlined strong economic fundamentals. NRL’s contribution to the Central and State exchequers in the form of taxes, duties and dividends during the last fiscal was reported to be Rs 4,159 crore.

For the same financial year, Govt of Assam, which holds an equity share of 12.35 percent in NRL, received a total amount of Rs 154.4 crore as dividend from the company.

In view of this, excluding NRL from the BPCL disinvestment plan makes a lot of sense and also provides succour to employees of the organisation while reassuring people of Assam who have sentiments attached with the refinery which was the result of Assam Agitation.

The historic Assam Accord, which was signed between the Centre and the leaders of Assam Movement in August 1985, had mandated setting up the refinery. It was dedicated to the nation by erstwhile Prime Minister Atal Bihari Vajpayee on 9th July, 1999. With its concern, commitment and contribution to socio-economic development of the State combined with a track record of continuous growth, NRL has been conferred the status of Mini Ratna PSU.

In April this year, NRL made foray into production of food grade wax, targeting major cosmetic manufacturers, pharmaceutical industries, food-based product packaging industries and FMCG industries both in the domestic as well as foreign markets, thereby enhancing its value chain and brand equity.

It is the largest producer of paraffin wax in the country producing almost 50,000 tonnes of fully refined paraffin wax i.e. Type II Wax currently holding a market share of 40%. Apart from meeting the demand of wax in the country and thereby reducing imports, NRL wax has been exported to 35 countries worldwide including North America, South America, Europe, Africa and Asia.

There are issues related to additional land, relaxation of No Development Zone around the refinery, availability of forest materials, development of road infrastructure and enhanced security around the refinery which would have to be addressed in future to sustain the growth of the refinery and continue its stature as one of the profit-making PSUs in the country.

Further, the refinery authorities should also look into preparing assessment reports to guide the government on skill enhancement and maximization of people’s involvement in the proposed bio-fuel plant for generating employment. There is need for NRL to carry out a study to identify the size of skilled manpower required to run the plant as well as the ancillary industries so that necessary skill development initiatives could be taken up beforehand.

While business remains the mainstay, the NRL’s focus must remain steadfast on CSR activities as it has already taken up several such projects in the recent past. Steps such as the adoption of Darrang district as an aspirational district and taking up projects for its holistic development, development of neighbouring Lakhipur as a model village and handing over of waste handling equipment to municipalities and town committees across Assam, thereby contributing to the Swachh Bharat Mission of Govt. of India are some of its key CSR initiatives.

Remaining at the technological forefront by continuous upgradation of in-house expertise and absorption of latest technologies while establishing strong corporate identity and brand equity are the main challenges of the company for facilitating economic and industrial development of the region.

In such a scenario, the decision of the Central government of not to hand over NRL to private party must be applauded as it provides employment to almost ten thousand people directly or indirectly. The Mini Ratna PSU born out of six-year-long Assam Agitation should be equipped to play the role of economic driver of the State and NE region. Its expansion project would also act as a shot in the arm for the refinery to double up its production capacity so the State can fuel the ambition of its economic resurgence while taking advantage of Act East Policy.