The OIDB has already disbursed slightly over Rs 1,000 crore to the Numaligarh refinery and the cut in the lending rate would mean that the proposed Rs 350 public issue can now be put on hold. It was planned over a year ago but could not take off due to poor market conditions. The issue would have covered 39 per cent of the equity in the project which will now be made up by borrowing from the OIDB.

BPCL and IBP jointly hold 51 per cent in the Numaligarh project with ten per cent accounted for by the government of Assam. Oil India has also agreed to subscribe to ten per cent of the equity but this is still awaiting final approval from the Cabinet Committee on Economic Affairs.

TheOIDB move is a clear indication that the government is keen on giving all the support necessary to projects in the northeast. The Numaligarh refinery could be of enormous strategic importance if a trade link with Bangladesh on petro-products actually materialises. In the years to come, the promoters are believed to be considering expansion to six million tonnes so that the viability of the project is not in doubt.

The OIDB generally monitors its disbursements every three years for a 10 year loan. It has constantly maintained an interest level of 14 per cent for all refineries and the recent decision on Numaligarh indicates that future projects in the northeast will also receive the same assistance.

The Oil and Natural Gas Corporation (ONGC) was at one point tipped to take a stake in the project but backed out subsequently. The reports doing the rounds now suggest that IBP, which holds 19 per cent, wants to offload its equity in favour of BPCL as it needs cash for its other expansion plans.

However,this may not find favour with the petroleum ministry especially when Oil India is all set to participate in the equity of the project.

The latest annual report of the petroleum ministry states that the Public Investment Board had, in July 1997, considered a detailed feasibility report for a marketing terminal to be set up near the refinery. Of the total projected cost of Rs 225.11 crore, BPCL's contribution will be Rs 24.2 crore keeping in line with the equity pattern in the refinery.

As for export of products to Bangladesh, a team from the petroleum ministry, Oil Coordination Committee and the working group (which drew up the plan) will kick off an exercise in this direction during the next few weeks.The working group, which finalised the proposal for evacuation of products from the refinery, has recommended sale of 0.5 million tonnes of petro-products to Bangladesh as the best option. The other alternatives which were reviewed included a product swap agreement with the country as also trading of highspeed diesel (HSD) and superior kerosene oil (SKO).

Both routes have been considered difficult as they would require prior government-to-government approval. However, a straight sale of 0.5 million tonnes is possible as this is covered under the existing protocol on inland water transit and trade between India and Bangladesh.