Reliance Industries Ltd, the countrys largest private sector company, has paid about Rs 50 crore as income tax for the current financial year. This is the first time ever that RIL has paid a tax in its over 20-year history.
Confirming the payment, an RIL spokesperson, however, declined to disclose the exact amount, saying it was relatively large.
Though the minimum alternative tax was effective from April 1, 1997, the company is understood to have decided against remaining a zero-tax company mainly because the tax rates would now come down to reasonable levels, at 35 per cent, as announced in the Union budget for 1997-98.
The company had not made any tax provisions while declaring its first-half results.
For the half-year ended September 1996, Reliance reported a net profit of Rs 651 crore on sales of Rs 3,900 crore.
Last year, its net profit was Rs 1,305 crore on sales of around Rs 7,786 crore. Operating profit was put at Rs 1,752 crore, while the company reported cash profits of Rs 1,642 crore.
The Rs 8,000 crore company has an equity base of Rs 460 crore.
RILs sustained capital investment programme has seen its gross assets rising from Rs 33 crore in 1977 to over Rs 15,000 crore this year, making it one of the frontline petrochemicals companies in the world.
Until now, RIL has remained a zero-tax company taking advantage of government policies and incentives under the tax laws relating to investments in productive assets.
This had become a topic for debate in recent months and with the introduction of the minimum alternate tax, which entails taking 30 per cent of the book profits to be deemed as income for tax purposes, it was being said that RILs profits would be hit.
In fact, doubts were expressed at the time of declaration of its first-half net profit that the full years profit figure would not be that impressive. However, according to sources, the company would be able to maintain its profitability and meet profit-after-tax estimates of foreign broking houses of Rs 1,200 crore for the financial year 1996-97.
According to analysts, the move to pay tax will also enhance RILs image among its international investors since the company now has a lineup of bonds ranging from 7-year to 100-year maturities.
Sources said the outlook for RIL remains bright as after all new projects, and expansion at its Hazira petrochemicals complex, the companys production capacity has quadrupled from 1.6 million tonnes per annum to 6 million tpa, setting the stage for further growth in profits.
Besides, the group will also be able to enjoy the benefits available to the infrastructure sector, like power and telecom, and also to new industrial undertakings located in backward areas.