Essar Oil secures Rs 5k-cr credit from 12 banks

New loan to help company meet its sales tax liability

Ruias-promoted Essar Oil has secured Rs 5,000 crore from a consortium of 12 banks to meet most of its Rs 6,169-crore sales tax dues to the Gujarat government.

According to a Press Trust of India report, the consortium of banks includes State Bank of India, ICICI Bank, Bank of Baroda, Punjab National Bank, IDBI Bank and Bank of India.

“Essar Oil is confident with this facility tied up, it would be in a position to meet its entire payment obligation,” read a press statement by the company on Monday.

Managing Director and chief executive Lalit Gupta said, “The new loan facility would 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.”

Last month, Essar Oil had told the Gujarat High Court it was operating under a working capital crunch would not have enough funds to pay its sales tax deferral liability to the state government. The court had later told the state government to expedite the recovery of the company’s sales tax deferral liability of about Rs 8,000 crore, including interest and penalty.

In May, Essar Oil had approached the high court, seeking a directive to the state government on the repayment and the interest it owed.

The firm had sought a waiver on the interest and the penalty— Rs 2,000 crore—on its sales tax deferral liability. It said of the total sales tax of Rs 6,406 crore, it had already paid Rs 237 crore. For the remaining Rs 6,169 crore, it had proposed annual instalments from April 2013.

In January, the Supreme Court had said Essar Oil was not entitled to deferment of sales tax payment.

On January 17, the Supreme Court had rejected the company’s 125 per cent sales tax deferment benefit claim on its investment in the Vadinar refinery project. The tax benefit was an incentive by the Gujarat government for Essar to start production at the Vadinar refinery in the state by August 15, 2003. Since the deadline was missed, the company had lost the right to defer the 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. The company had then approached the Supreme Court, which asked it to deposit Rs 1,000 crore of sales tax dues by July 31.

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