With formal resolution of tax dispute relating to its Paradip refinery now being just a matter of time , the oil PSU plans to invest additional Rs 52,000 crore in expanding capacity of the project and setting up petrochemical complex.
IOC and the Odisha government have agreed on modalities to resolve the tax dispute following intervention from petroleum minister Dharmendra Pradhan. As part of the understanding reached between the two sides, the Odisha government has agreed to restore part of the tax incentives.
The state government will give Rs 700 crore per annum of an interest-free loan for 15 years to make up for the withdrawn incentive of 11-year deferment on payment of sales tax on Paradip refinery products sold in the state.
“IOC wanted Rs 1,000 crore per annum of the interest-free loan but in the end settled for Rs 700 crore loan over a longer 15-year period,” said a news agency report quoting an unidentified official.
After the dispute is formally resolved, IOC will go full stream with the expansion of Paradip refinery capacity by 5 million tons a year as well as set up a polypropylene plant and a mono-ethylene glycol production facility in 4-5 years, he said.
IOC will also take back a case filed at the Odisha High Court against the state government’s decision to withdraw signed commitment.
Odisha, which through a February 22 decision, withdrew the promised 11-year VAT or sales tax deferment, wanted the tax revenues to first come to its book and release the interest-free loan later, which was found acceptable by IOC.
“The Rs 700 crore interest-free loan for 15 years is equal to the tax incentives Rajasthan has recently extended for setting up of a refinery in Barmer by HPCL. It is also similar to the tax breaks given by Punjab for Bhatinda refinery and Madhya Pradesh for the Bina unit,” he said.
The official said IOC and Odisha government will sign an addendum to the original tax incentive agreement of 2004.
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