IOC and the Odisha government have agreed on modalities to resolve the long-running tax dispute relating to the Paradip refinery, sources said.
This comes after petroleum minister Dharmendra Pradhan took up the matter with Odisha chief minister Naveen Patnaik in Delhi yesterday.
As per the understanding reached between the two sides, VAT collected by IOC from April 2015 till now but not paid will be deposited immediately. The Odisha government will waive off penalty and interest on VAT held back by IOC, sources said.
The Odisha government will provide interest-free loan of Rs 700 crore for a period of 15 years to the state-owned refiner as viability gap funding. The state will disburse loan in four equal quarterly instalments.
The two sides will also file a joint petition in the Cuttack high court to apprise it of the settlement reached between them, sources said.
The state had promised tax incentives for the project. However, credit of the sops was linked to timely commissioning of the project.
However, the project got delayed by six years. Besides, the project capacity was also increased by the developer subsequently. The state government has cited these as valid reasons to deny the incentives.
However, IOC has argued that delay was caused by cyclone and land acquisition problems, for which it cannot be blamed. And so far as change in capacity is concerned, it is permitted under the 2004 pact signed by the sides, the oil PSU has said.
According to IOC, the Odisha government was informed about the change in capacity and the delay in construction caused by cyclone, land acquisition and law and order problems. Also, the state government had allowed the company to avail of construction period incentive, listed in the MoU, totalling at Rs 550 crore, it added.
The state government had announced its decision to withdraw tax sops to the project in February this year, nearly two months after serving a show-cause notice to the company.
IOC plans to expand the 15-mt-a-year Paradip refinery by 5 million tonnes as well as set up a polypropylene plant and a monoethylene glycol production facility at the site of the 1-year old refinery.
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