You are here: Home » Companies » News
Business Standard

Odisha offers Rs 700 cr interest-free loan as Pradhan breaks IOCL impasse

Loan to be given each year for 15 years; repayment starts in 16th year

BS Reporter  |  Bhubaneswar 

Indian Oil Corporation, IOCL, IOC
Indian Oil Corporation logo Photo: Reuters

The impasse between the and Ltd (IOCL) ended with both parties agreeing on a consensus. According to a mutually agreed compromise formula, the state government would extend a Rs 700 crore interest-free loan annually to the oil marketing company for 15 years. Earlier, the state government had announced deferment of Value-Added Tax (VAT) for 11 years to ensure commercial viability of IOCL’s crude oil refinery at Paradip.

The announcement on the resolution of the deadlock was made by (PNG) minister at a press conference in New Delhi on Saturday. 

As per the revised understanding, IOCL will start repayment from the 16th year onwards. “This is a historic day for people of Odisha, dwellers of the state have got their dues without spoiling the industrial atmosphere of the state. This would give a substantial amount of additional revenue (around Rs 1,500 crore) to the state of Odisha”, Pradhan tweeted.

The development comes a day following a high-level meeting between Odisha chief minister Naveen Patnaik and the PNG minister. Top officials of the state government, PNG secretary KD Tripathi and IOCL’s chairman cum managing director Sanjiv Singh were present at the meeting.

Pradhan said, the dispute resolution assumes significance, especially in the context of Odisha's industrialisation as fresh investments by IOCL, would have a multiplier effect on its economy. New ancillary and downstream units would further boost job creation.

The dispute between IOCL and the began over the award of fiscal incentives to the 15 million tonnes per annum refinery at Paradip. As per a pact signed between the two parties in 2004, the state government had allowed VAT deferment to the oil major for a period of 11 years from the start of commercial operations by the refinery. In the original pact, IOCL had committed to set up a refinery of nine million tonnes capacity. Later, it expanded capacity to 15 million tonnes. 

The state government officials argued with the expanded capacity, the IOCL refinery was viable and hence, did not need the VAT concession. Accordingly, the state government scrapped the old notification in February this year and slapped a demand notice of Rs 1,485 crore on IOCL towards payment of VAT dues. IOCL had contested this decision in the Orissa High Court.

First Published: Sat, August 19 2017. 17:49 IST
RECOMMENDED FOR YOU