Saudi puts condition for investments, asks India to resolve implementation of WCR
New Delhi: The Saudis have informed India that they will not invest in two other planned refinery projects until the Government of India does not resolve the implementation of the West Coast Refinery (WCR) which has been hanging fire for years.
A delegation of Oil & Natural Gas Corporation and Bharat Petroleum Corporation Ltd officials visited Riyadh in May 2024 and presented new refinery proposals — one by ONGC in Gujarat and the other by BPCL in Andhra Pradesh of approximately 10 million tonne each — to Saudi Arabia’s Ministry of Energy and Saudi Aramco.
However, last June, the Saudis conveyed to New Delhi that the WCR was a key priority for them to arrive at a closure before the other two refinery proposals could be discussed. It said it would consider them only after a clarity on the WCR project.
Riyadh has repeatedly raised the WCR issue since 2019 but there has been no significant progress due to issues pertaining to land acquisition for the project. It also came up during discussions between Saudi Prime Minister Mohammed bin Salman and Prime Minister Narendra Modi during MBS’ state visit to India in September 2023 where it was decided to establish a High-level Task Force (HLTF) to look into pending issues pertaining to Saudi investments in India.
The HLTF was finalized earlier this year with Principal Secretary to Indian PM and Saudi Minister of Energy leading it at the strategic level. The latter wants HLTF to adopt a top-down approach to resolve all issues since there have been several rounds of technical discussions without any significant outcome.
WCR or the Ratnagiri Refinery & Petrochemicals project is a joint venture formed in September 2017 by BPCL, Indian Oil Corporation and Hindustan Petroleum Corporation Ltd (HPCL). State-run Saudi Aramco plans to invest $50 billion in the proposed 60-million-tonnes-per-annum project that includes petrochemicals facility.
However, the project proposed in Maharashtra’s Ratnagiri district has got delayed due to changes in its location, completion of site suitability studies, etc. Besides, the overall cost and timelines have not been determined as suitability of the site identified by the Maharashtra government has not been established.
Linked to the WCR investment is the Double Taxation Avoidance Agreement (DTAA) between the Saudis and India. The Saudis want tax exemption on incomes derived from its huge investments wherein the tax relief should encompass all incomes derived by the State as well as the entities wholly owned (whether directly or indirectly) by it such as Saudi Aramco.
India says that tax exemption to sovereign entities can only be granted through domestic laws like Section 10 (23FE) of the Income Tax Act and not through DTAA. Any other exemption, not within the scope of this section, can be conferred only by tweaking these laws and not through DTAA, it adds.
