In a big jolt to Indian Oil, the Odisha government has withdrawn tax incentives given to the ₹34,555-crore Paradip refinery, making the company reconsider its plans to invest another ₹52,000 crore in the state.
Less than two months after serving the first show-cause notice, the Odisha government on February 22 wrote to its single-biggest investor saying it is withdrawing the promised 11-year deferment on payment of sales tax on Paradip refinery products sold in the state, sources said.
The withdrawal will cost Indian Oil Corporation (IOC) ₹2,000 crore this year and will progressively increase every year as more petrol and diesel as also petrochemicals are sold within the state.
Viability threat
The sources said that besides leading to levy of sales tax on 2 million tonnes of petrol and diesel sold in the state annually, the withdrawal is threatening viability of investments in downstream petrochemical plants as products from it will be consumed by an array of synthetic fibre and plastic industries and now tax will also be levied on them. When asked, IOC Director (Refineries) Sanjiv Singh said he would not like to discuss merits of the State government’s decision in the media.
“IOC had invested about ₹50,000 crore in Paradip refinery on the Odisha coast and in associated projects. We had plans for more investment, especially in downstream petrochemical projects and refinery expansion, considering the incentives given by the state.
“But in the present scenario, future investment options will require to be reassessed,” he said.
