Steel czar Mittal puts Punjab in a bind over sops

Now,over a year and a half after Mittal threatened to pull out of the project in March last year over the lack of an agreement on concessions,Punjab has yet to make up its mind on what was “agreed to” after the intervention of Prime Minister Manmohan Singh. “Mittal was demanding a Rs 1,000 crore interest-free loan for 15 years. After protracted negotiations,the figure agreed on was Rs 400 crore for 15 year— ¿ costing the state Rs 6000 crore. The last request was made in June 2009 and is still under consideration,” Chief Secretary S C Aggarwal said. But according to government officials,even the Rs 400-crore-for-15 years offer would be as good as giving it away free to Mittal.

This is not the first time that the refinery has been caught on the wrong foot between alternating Congress and Akali governments in the state. HPCL was first issued a letter of intent (LoI) by the Congress government during the tenure of Chief Minister H S Brar in April 1996. But the first agreement was signed during the tenure of the Badal government wherein HPCL was promised deferment of entire sales tax. The Congress,on coming back to power in 2002,ordered a cost-benefit analysis and found it to result in revenue losses to the tune of Rs 600 crore per year to the state,which was denied as “too much which cannot be afforded by the state”.

Later in February 2007,HPCL joined hands with Mittal. On October 17,2007,a formal demand for concessions was submitted to the Punjab government entailing Rs 1,000 crore interest-free loan for 15 years. After the foundation stone was laid in November 2007,the Badal government agreed to a Rs 250 crore interest-free loan for five years after the refinery begins production. However,in March 2009,Mittal cited a loss of fortune due to the global downturn and requested the state government for more. Finally,both Mittal and Punjab Chief Minister Parkash Singh Badal sought the PMO’s intervention,a move which also helped him silence opposition from the state Congress. Later,at a meeting between Mittal Energy and Sukhbir Singh Badal,the chief secretary and the finance secretary,Mittal agreed to scale down the request to Rs 400 crore for 15 years. This request is still to go either way.