BARMER: Indian Prime Minister Narendra Modi on Tuesday launched the construction of a $6.8 billion refinery in the western state of Rajasthan, in the hopes of meeting the rising fuel demand.

By 2030, India’s demand for petrol and diesel is expected to go up by two-thirds to 170bn litres, as an expanding middle class spends on cars and air travel.

The 180,000-barrel-per-day refinery and petrochemical project is being built by the country’s third-biggest state refiner Hindustan Petroleum Corp Ltd (HPCL) in a tie-up with the state government. The foundation stone for the project was first laid in September 2013 by the then ruling Congress Party chief Sonia Gandhi. However, the project remained a non-starter as the state government had not given adequate incentives.

The project is now estimated to be completed by 2022-23, Oil Minister Dharmendra Pradhan said.

To make the project viable, the state government has offered an interest-free loan of 168.45bn rupees ($2.63bn) to HPCL to be paid back in 15 years from the commissioning of the project, Pradhan added. Energy analysts are, however, skeptical about the project’s profitability in a land-locked desert state.

The Rajasthan refinery will have to bear the crude transportation costs as well as deal with water scarcity, said a senior executive at a private refiner who req­uested anonymity, citing company policy.

Published in Dawn, January 17th, 2018