The question mark that hangs over a proposed $70 billion refinery and petrochemicals project in Maharashtra, with the new ruling alliance hinting it is likely to scrap the project, points to a growing problem of politics trumping economics in India’s increasingly federated political structure.
There has been long-standing opposition to it by all the three partners in the coalition—Shiv Sena, Nationalist Congress Party and the Congress.
On Wednesday, Shiv Sena spokesperson Manisha Kayande said the alliance will scrap the Ratnagiri Refinery & Petrochemicals Ltd (RRPCL) project, initiated by the previous Bharatiya Janata Party-led government.
The 60 million tonnes per annum (mtpa) refinery is a joint venture between Saudi Aramco, Abu Dhabi National Oil Co. (Adnoc), and three state-run oil marketers— Indian Oil Corp. Ltd, Hindustan Petroleum Corp. Ltd and Bharat Petroleum Corp. Ltd.
Saudi Aramco and Adnoc will jointly own 50% in the project, and the Indian companies the rest. “We have not heard anything from the central or state government on this project. We hope the project receives relevant clearances and is fast-tracked given it has already seen delays," said a senior official from an oil marketing company on the condition of anonymity.
Already, foreign investors have been left jittery by Andhra Pradesh chief minister Y.S. Jagan Mohan Reddy’s plans to review agreements signed by the previous N. Chandrababu Naidu-led government, including one on the new state capital Amravati.
With cumulative foreign direct investment inflows between April 2000 and May 2019 accounting for around $628 billion, analysts said India cannot afford to upset foreign investors as it aims to become a $5-trillion economy by 2024-25.
“With the change in the centre-state relationship and the states getting more role, the states have higher degree of freedom to determine their destiny with reference to direct investment in certain markets," said Biswajit Dhar, professor at JNU.
“There has to be a successful facilitation by the states. The states will have to be mindful of this. They have to set the tone for real changes to take place in their domain."
The issue assumes importance given India’s attempt to attract global investors in the current investment climate, with rising trade tensions and a slowing world economy. It also comes in the backdrop of its projected image of a rules-based regime getting dented.