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Tax-relief-withdrawal blow to Paradip Refinery

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 company.  

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 sources.

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”.



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