India’s development assistance to Mongolia


The India-Mongolia partnership achieved a new milestone with the launch of construction of Mongolia’s first oil refinery in a remote corner of the Gobi desert in June 2018.


As part of financial assistance, India is providing a soft loan of USD 1.2 billion for the project repayable over a 20-year period. Mongolia, despite having 400 million tonnes of oil reserves, is dependent on Russia for almost all of its oil product needs.


The refinery, to be commissioned in 2025, will help Mongolia achieve energy self-sufficiency as it will have the capacity to process 1.5 million tonnes of crude oil per year. The project is also expected to boost Mongolia’s GDP by up to 10 per cent.


Appreciating India’s development assistance, recently a popular Mongolian news channel telecast a 15-minute program underlining the refinery’s impact on Mongolia’s energy security. The program delineated various nuances of oil production, refining and its co-relation with the Mongolian energy matrix. The news feature dovetailed relevant data, interviews and infographics on an oil refinery project being commissioned in Dorn Gobi Province, a first of its kind for Mongolia.


It commended Indian workers for putting in hard work in the inhospitable Gobi Desert to fulfil Mongolia’s long-cherished dream of hosting their very own oil refinery. Mongolian Mining Ministry and Mongol Refinery Officials also praised Indian engineers for tackling challenges while executing this complex technical project in one of the harshest terrains.


Incidentally, the news program underlined irregularities in taxation and regulatory compliances by Chinese companies that have dominated the Mongolian oil production ecosystem for a long. Specific cases e.g. Petro China’s irregularities were discussed. The audience was briefed on the local population’s opposition to Petro China’s field operations over environmental concerns and unethical business practices.


The oligopolistic and cartelization tendencies of Chinese companies were also explained in detail with illustrations as to how it has stunted the entry of reputed international oil exploration companies despite the liberalization of Mongolia’s energy sector since 1990s.


Notably, Mongolia is not the first country where Chinese companies have been involved in unethical business practices. Several cases of breach of taxation and regulatory compliances, non-payment to local vendors, import of prohibited items, and environmental hazards of Chinese-funded projects have been reported from recipient countries. One must learn from several examples around where opaque lending terms of Chinese funding have resulted in ceding of strategic assets to Beijing, thereby, compromising the sovereignty and territorial integrity of recipient countries.


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