Economic Impact of the Proposed Ratnagiri Refinery in Maharashtra Impact on Maharashtra’S Economy
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National Council of Applied Economic Research Economic Impact of the Proposed Ratnagiri Refinery in Maharashtra Impact on Maharashtra’s Economy Report January 20210102 2021 1 2 Economic Impact of the Proposed Ratnagiri Refinery in Maharashtra Impact on Maharashtra’s Economies Project for the Ratnagiri Refinery and Petrochemicals Limited Mumbai January 2021 NATIONAL COUNCIL OF APPLIED ECONOMIC RESEARCH NCAER India Centre, 11-Indraprashtha Estate, New Delhi-110 002, India STUDY TEAM Project Leaders: Saurabh Bandyopadhyay and Laxmi Joshi Domain Experts: Devender Pratap, Pradip Kumar Biswas, and (Late) Prof M.R. Saluja Senior Advisor: Shashanka Bhide Core Team Members: Tarujyoti Buragohain and Ajaya K Sahu Research Support: Ashutosh Vashisht Editor: Anupma Mehta © National Council of Applied Economic Research, 2021 Published by Publications Coordinator ii FOREWORD he Indian petroleum refining industry has and the operational phases of the project starting done remarkably well in establishing itself from 2021 onwards. These are estimated at the as a major player globally. The last decade national level. has seen the emergence of India as the Tlargest exporter of petroleum products in Asia. The NCAER study also brings out these India’s refining capacity has grown from a modest economic benefits for the State of Maharashtra. 62 million metric tonnes per annum (MMTPA) in The NCAER study further discusses the impact of 1998 to about 250 MMTPA at present, comprising the RRPCL investment on economic conditions 23 refineries—18 in the public sector, 3 in the in the relatively backward districts in the western private sector and 2 as joint ventures. coastal region of Maharashtra. This covers the impact on economic opportunities, mobility, and India is planning to double its refining capacity the employment of the local population during both for crude oil to 450-500 MMTPA by 2030. India’s the construction and operational phases of the consumption of petroleum products is likely to rise project. to 335 MMTPA by 2030 and to 472 MMTPA by 2040 according to government estimates. I join the NCAER team in expressing my India needs to boost its refining capacity urgently appreciation for the insights and guidance received to meet the growing demand. from officials of RRPCL at various stages of this study. I would like to thank the RRPCL core team A new refinery at Ratnagiri with a refining led by Mr B K Namdeo and complemented by capacity of 60 MMPTA is one of the key projects Mr Satya Prakash, Mr Rupam Sutradhar, and Mr in this planned expansion of refining capacity. Pawan Goswami, who, throughout the entire study This is being promoted by the Indian PSUs, period, took part in discussions and interacted with Indian Oil Corporation Ltd, Bharat Petroleum the NCAER team to carry out this Economic Impact Corporation Ltd, and Hindustan Petroleum Assessment study. Corporation Ltd Global multinational companies, Saudi Aramco & the Abu Dhabi National Oil I would like to thank the NCAER team co-led by Company have also shown interest in the project, Dr Saurabh Bandyopadhyay and Dr Laxmi Joshi and will participate in its development through a and team members Mr Devender Pratap, Dr 50 per cent equity participation. Pradip Kumar Biswas, Dr Tarujyoti Buragohain, and Mr Ajaya Sahu for their diligence in carrying NCAER was requested by the Ratnagiri Refinery out this study. I would like to pay our last respects & Petrochemicals Limited (RRPCL) to conduct to late Professor M R Saluja, who was integral an economic impact analysis of the project to part of this study and contributed significantly to estimate the economic rate of return of RRPCL’s it but who sadly passed away before it could be investment during its investment horizon. In this completed. Finally, I am grateful to Dr Shashanka study, the NCAER team reports on the extensive Bhide, NCAER’s Research Director, who ensured estimation of the benefits of the RRPCL investment quality control and provided overall supervision in terms of overall output, incomes, employment for the study. and tax contributions during both the construction New Delhi Dr Shekhar Shah January 2021 Director General NCAER iii ACKNOWLEDGEMENTS his report is the outcome of an in- Transaction Table for both India and the State of depth study conducted by NCAER for Maharashtra. The NCAER analysis is also based the proposed Ratnagiri Refinery and on in-house (both published and unpublished) Petrochemicals Limited (RRPCL) along data provided by the technical and financial team Tthe west coast of the State of Maharashtra in of RRPCL, which facilitated the study. The NCAER India. The study traversed through one of the team would like to express its deep sense of most difficult and challenging periods of human appreciation for the cooperation extended by the history resulting from the COVID-19 pandemic, following RRPCL officials: Mr P. Balasubramanian, but the NCAER team is happy to have completed Mr Gautam Roy, Mr Mohan Menon, Mr Subrata De, the project within the stipulated time frame. Smt Manisha Gangwar, and Mr Nikhil Dayanand. Notwithstanding the difficult situation, the NCAER and RRPCL teams interacted with each other The NCAER study team also gratefully through virtual meetings almost every week since acknowledges the encouragement received from March 2020 till the completion of the study. This Dr Shekhar Shah, Director General of NCAER, close interaction allowed NCAER to complete the and Shri B. Ashok, the CEO of RRPCL. Thanks are study efficiently. also due to Dr Anil Kumar Sharma, Secretary and Operations Director of NCAER, and Dr Sanjib Pohit, We greatly acknowledge the contribution of the Professor at NCAER, for their critical support. Last RRPCL core team led by Mr B.K. Namdeo, and but not the least, the study team is grateful to the supported by Mr Satya Prakash, Mr Rupam IT teams at both NCAER and RRPCL, which offered Sutradhar, and Mr Pawan Goswami, who actively technological and communications support for took part in all the discussions throughout the completion of the project in the midst of the entire study period, enabling the NCAER team to Coronavirus challenge. carry out this Economic Impact Assessment study. The discussions with the RRPCL team facilitated a better understanding of the oil sector, which added to the value of the Economic Impact Analysis (EIA) that was carried out using the Input-Output iv ABBREVIATIONS AND ACRONYMS ADNOC Abu Dhabi National Oil Co LDPE Low Density Polyethylene ASI Annual Survey of Industries LLDPE Linear Low Density Polyethylene ATF Aviation Turbine Fuel LPG Liquefied Petroleum Gas BP Base Prices M Mixed Income BPCL Bharat Petroleum Corporation Limited M&Q Mining and Quarrying CAGR Compound Annual Growth Rate MEG Mono Ethylene Glycol CFC Consumption of Fixed Capital, MFG Manufacturing CGE Computable General Equilibrium MMTPA Million Metric Tonnes per Annum CMIE Centre for Monitoring Indian Economy MoSPI Ministry of Statistics and Programme CNG Compressed Natural Gas Implementation COE Compensation of Employees MPR Monthly Progress Report CON Construction MS Motor Spirit CSA Civil, Structural and Architectural NAS National Accounts Statistics CSO Central Statistics Office NCAER National Council of Applied Economic CV Coefficient of Variance Research DEG Di Ethylene Glycol NDT Non Destructive Testing EGW Electricity, Gas, Water Supply and NIC National Industrial Classification Other Utilities NIT Net Indirect Taxes EIA Economic Impact Analysis NSS National Sample Survey EIL Economic Threshold level NSSO National Sample Survey Office EO Ethylene Oxide OS Operating Surplus EPCM Engineering, Procurement, P&M Procurement and Management Construction and Management PCP Petrochemical Products ESA Ecologically Sensitive Area PFCE Private Final Consumption EV Electric Vehicle Expenditure F.o.B Free on Board PLFS Periodic Labour Force Survey FC Foreign Component PMC Project Management Contract GDP Gross Domestic Product PO Post Office GDVA Gross District Value Added POL Petroleum, Oil and Lubricants GFCE Government Final Consumption PP Purchasers’ Prices Expenditure PP Polypropylene Production GSDP Gross State Domestic Product PPAC Petroleum Planning and Analysis Cell GST Goods and Services Tax PTA Purified Terephthalic Acid GSVA Gross State Value Added PTA Pure Terephthalic Acid GVA Gross Value Added PVC Polyvinyl Chloride HDPE High Density Polyethylene R & D Research and Development HPCL Hindustan Petroleum Corporation RBI Reserve Bank of India Limited RRPCL Ratnagiri Refinery and HPEO High Purity Ethylene Oxide Unit Petrochemicals Limited HSD High Speed Diesel Saudi Aramco Saudi Arabian Oil Co IC Intermediate Consumption SUTs Supply and Use Tables IC Indigenous Component TTM Trade and Transport Margin IGST Integrated Goods and Services Tax UPS Usual Principal Status IOCL Indian Oil Corporation Ltd USS Usual Subsidiary Status IOTT Input Output Transaction Table VAT Value Added Tax v CONTENTS Study Team ii Foreword iii Acknowledgements iv Abbreviations and Acronyms v Executive Summary 1 Economic Impact Analysis of the Proposed Ratnagiri Refinery in Maharashtra: Implications for the State Economy 4 1. Introduction 5 1.1. Maharashtra: The Location Context for RRPCL 6 2. Explanations of a few Concepts 9 3. The Maharashtra Economy: A Synoptic View 11 4. Methodology for Estimation of Benefits 17 4.1 Estimation of Employment Contribution 18 5. Estimation of Economic Impact Using Type I Multipliers from the Maharashtra 19 IOTT for the Construction Phase 5.1 Economic Benefits during the Construction