Mittal gets cabinet all-clear for 49% in HPCL refinery

Mittal gets cabinet all-clear for 49% in HPCL refinery
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First Published: Fri, Jun 22 2007. 12 22 AM IST

Updated: Fri, Jun 22 2007. 12 22 AM IST
The Union cabinet on Thursday cleared the ground for steel magnate L.N. Mittal to acquire 49% stake in Hindustan Petroleum Corp. Ltd’s (HPCL) Bhatinda refinery for $785 million, hiked royalty rates on coal and lignite and decided to expand the buffer stock for sugar by another 30 lakh tonnes to ease the supply glut in the market.
“This joint venture will be the largest foreign direct investment in a public sector unit in the refining sector,” said Priya Ranjan Dasmunsi, minister for parliamentary affairs after a cabinet meeting. Mittal’s investment required cabinet approval since it exceeded an earlier government-defined ceiling of 26% for foreign direct investment in joint ventures with public sector undertakings.
The decision to hike the royalty payable to coal-producing states by companies mining the fuel is the first such increase in three years, and state governments had been asking for it. Coal producing states now stand to gain approximately 14% more from the production and sale of mineral resources, finance minister P. Chidambaram said.
Cabinet Call (Graphic)
The earlier rate of royalty on coal and lignite varied between 13% and 20%. The new rate will vary between 15% and 31% depending on the grade of coal. States will see their royalty from coal rising by 14% and from lignite by 24%. “Any increase in royalty will reflect on prices,” Chidambaram said.
This means that input costs for power, cement, and steel producers, all major users of coal, will increase.
The increase in buffer stock for sugar by another three million tonnes comes on account of higher than expected production of sugar, Chidambaram said. While the estimate for sugar production was 21 million tonnes, actual production is now estimated at 27.5 million tonnes. “We are exporting whatever can be exported but the sugar stock now needs to be stored to see some cash flow for the industry. How else will farmers prepare for plantations for the next season?” he asked.
The sugar development fund of the government will spend roughly Rs590 crore to acquire this additional buffer stock he said. “It is a move in the right direction and will help the industry and the economy,” said S.L. Jain, director general, Indian Sugar Mills Association, an industry body.
In addition, the government has referred all other matters affecting the sugar industry, including the rescheduling of past and existing bank loans, to a group of ministers. A committee chaired by S.K. Mitra, executive director, Nabard (National Bank for Agriculture and Rural Development), is already considering the rescheduling of loans, and its report is expected by the end of the month.
In other decisions, the cabinet marginally revised downward to Rs2,400 crore the project cost for the Kishenganga hydroelectric power project being set up by National Hydroelectric Power Co. (NHPC) in Baramullah district of Jammu and Kashmir, on one of the tributaries of Jhelum. The decrease was due to deductions and savings.
The cabinet also extended by a year the Centrally-sponsored Swayama Siddha Scheme meant to support women’s self-help groups which ended in March 2007. The extension is to help the scheme utilize unspent balance funds worth Rs27.81 crore.
A scholarship scheme that will cover 20,000 students from the minority religions every year has also been cleared by the Union cabinet. A maximum of Rs25,000 will be spent on every qualifying student from the Muslim, Sikh, Christian and Parsi communities, except for students who qualify for IIMs, IITs or AIIMS, who will get a full tuition waiver. The total cost of the scheme is Rs761.69 crore during the 11th Plan (2007-12).
The cabinet has also approved in principle an integrated strategy for promotion of agribusiness. The strategy involves a detailed mapping of food clusters in the country that will encourage contract farming, upgrade the quality of street food, enhance capacity building in areas of human resource development and quality control labs for the sector.
The target is to increase the size of the processed food sector by three times, enhance farmer income and generate additional income through the sector.
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First Published: Fri, Jun 22 2007. 12 22 AM IST
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