After the commissioning of the Rs 34,555 crore worth
state-run Paradip refinery last year, the mega refinery complex is contending
with a major crisis with Odisha government initiating a drastic step in
withdrawing the tax relief.
Odisha government had earlier committed 11-year deferment on
payment of sales tax to the oil on petro products produced and sold by the oil
Significantly the Indian Oil company has rolled out slew of
petro-chemical projects with an estimated investment of Rs 52,000 crore in
coming years. However the oil major may go for a rethink for implementing these
projects following the withdrawal of tax incentives by Odisha government.
It’s pertinent to note here that Prime Minister Narendra Modi had
dedicated the mega Rs 34,555 crore Paradip refinery project to the nation on
February 7, 2016 amid much fanfare. Mr. Modi had said that refinery project
would usher in economic prosperity not only to Odisha but also to the entire
eastern states of the country.
Odisha government in an official letter dated February22 to the
Indian Oil Corporation Limited (IOCL) has expressed its inability to extend the
tax incentives. The withdrawal is being effected on public interest as Odisha
is losing tax revenue due to extension of incentives to IOCL, said official
The withdrawal will cost Rs 2,000 crore to Indian Oil Corporation
(IOC) this year and will progressively increase every year as more petrol and
diesel as also petrochemicals are sold within the state.
The investment by IOCL in Odisha is to the tune of Rs
50,000 cr that included the Paradip refinery project. Besides, investment has
also been made in ancillary projects like pipelines and port. In downstream
petrochemical projects and refinery expansion programmes, the oil company has
either investment or has planned for investment in future. The withdrawal of
tax incentives is a major blow to the oil company and it is likely to have
retarding effect on petro-chemical investment in Odisha, said Paradip refinery
officials requesting not to be quoted.
Union Petroleum minister Dharmendra Pradhan however said
withdrawal of incentives goes against the letter and spirit of the MoU that had
signed between the Odisha government and IOCL.
“The move is anti-people as IOCL which is poised to generate
employment for local people would be affected by the Odisha government’s
decision. The ministry of petroleum has an ambitious plan to invest Rs 1.25
lakh crore in the state. But by withdrawing tax concession the state government
is blocking the investments coming to the state. This will affect job
opportunities of Odia youths,” minister Pradhan said.
However the Odisha government sources said “As the IOCL is making
profit, there is no need to extend tax relief to it. The tax revenue that is
waived could be effectively utilized for developmental projects in the state”.