Essar Oil borrows Rs 5,000 cr to meet sales tax dues

Firm owes Rs 6,169 cr to the Gujarat govt after it deferred payment of sales tax

Essar Oil Ltd today said it has tied up Rs 5,000 crore loan to meet most of its Rs 6,169 crore sales tax dues to the Gujarat government.

"Essar Oil is confident that with this facility tied up it will be in a position to meet its entire payment obligations," the company said in a press statement.

"A new credit facility from domestic banks to provide a credit line of up to Rs 5,000 crore to meet its sales tax liability of Rs 6,169 crore" has been tied up, it said.

"The company continues to pursue the matter of repayment schedule of its sales tax liability both legally and with the Gujarat state government," the statement said.

The Supreme Court had in January said Essar Oil was not entitled to defer payment of sales tax, an incentive offered by the Gujarat government for the company to start production at its Vadinar refinery in the state by August 15, 2003.

Since the deadline was missed, the company lost right to defer sales tax payment by 17 years.

To recover dues, the Gujarat government had on July 9 attached three bank accounts of Essar Oil in Jamnagar. There after the company approached the Supreme Court which asked Essar Oil to deposit Rs 1,000 crore out of the sales tax dues by July 31.

Essar Oil MD & CEO Lalit Gupta said: "The new loan facility will enable Essar Oil to meet its sales tax liability. Our lenders have continued to be very supportive of the business, which remains well placed given the demand for high value fuels both in India and internationally."