Orissa to take IOC Bonds in lieu of Sales Tax

By Our Special Correspondent

BHUBANESWAR, JUNE 9. The Orissa Government today finally agreed to accept Indian Oil Corporation (IOC) bond in lieu of the sales tax to be imposed on its proposed Rs.8332 crore Paradeep Oil Refinery project.The Prime Minister, Mr. Atal Behari Vajpayee, had laid the foundation stone of the project in June last year.

Work on the project had come to a standstill over the last several months on account of the State Government's refusal in granting sales tax holiday.

The Orissa Chief Minister, Mr.Naveen Patnaik had raised the subject with the Centre a number of times and the Prime Minister reportedly asked Mr.Patnaik to sacrifice something for getting the project through.

Work on the nine million tonnes project had come to a standstill following the refusal of State Government to grant sales tax holiday. The State Government and IOC officials led by its Chairman, Mr.M.A.Pathan, held several rounds of discussions Bon the issue.

The State Cabinet, which met this morning, agreed to the proposal of IOC to issue bonds in lieu of the sales tax imposed by the Government. Mr.Pathan had met Mr.Patnaik and State Government officials last week and submitted the proposal to issue bonds in lieu of the sales tax imposed by the State Government.

Accordingly, on behalf of the IOC two merchant banks had presented the credibility and marketability of the IOC bond in the International market and assured to market the bond.

The State Government, which presently is under serious debt trap had maintained that, if the Government allowed tax holiday to IOC, State's economy would further deteriorate and the Government on the long run would stand to loose Rs.20,000 crores. However, at the Cabinet meeting held this morning approved the IOC proposal to accept bonds in lieu of sales tax for 11 years from the date of commercial production of the project.

The project cost has shot up from Rs.8332 crores to Rs.10.000 crores.

Briefing newsmen after the Cabinet meeting the State Chief Secretary, Mr.D.P.Bagchi, said the previous Government had agreed to grant tax holiday for the project and the present Government also agreed to grant certain concessions as per the intervention of the Prime Minister who asked both the parties to sacrifice something. He said the State would receive IOC bonds to the tune of Rs.3000 crores during the 11 years which will have maturity value for seven years and coupon rate of five percent.

Mr.Bagchi said the Orissa Government has decided to amend the Orissa Sales Tax Act to enable the State Government to grant central sales tax exemption on finished products for 30 years and entry tax exemption for crude oil for five years.

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Section  : Other States
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