Withdrawal of sops to IOC to impact investor sentiment in Odisha: CII

This comes at a time when the state govt has withdrawn incentives to Paradip refinery project

The standoff between state-run Indian Oil Corporation Ltd (IOC) and Odisha government over sops for Paradip refinery has taken a fresh twist now. The Confederation of Indian Industry has come out in public stating that the withdrawal of tax incentives by the state may hit investor confidence.

In a letter to Odisha chief minister Naveen Patnaik, CII president Naushad Forbes said, “Many policies to attract investments have incentives, which if not honoured at a later date may affect investor sentiment adversely.”   

This comes at a time when the state government has withdrawn incentives to the Paradip refinery project, citing that it may lose revenue of Rs 22,745 crore on the present value basis by allowing the company to defer paying value added tax on the refinery’s entire produce sold in the state for the first 11 years of commercial production. This amount was expected to be Rs 9,783 crore in 2004 according to the state.

On the other hand, IOC is of the view that the impact of interest free loan given to IOC as per MoU for eleven years VAT deferment computed by the state is astronomically high and as per the company's calculation, it should be in the range of Rs 8,000-9,000 crore.

The oil marketing major is the single largest investor in Odisha and withdrawal of sops may cast shadow on another Rs 50,000 crore worth of investments that the company is planning for associated projects like pipelines and port. It also includes setting up of a polypropylene plant of Rs 3,150 crore and mono ethyl glycol (MEG) unit of Rs 4,000 crore. 

The state unit of CII too has been batting for a solution in the matter, which is currently subjudice. The state government claims the profitability of the refinery has increased because of low global crude oil prices and higher capacity configuration than planned. Though the refinery was initially planned for 9 million tonne production, it was later increased to 15 MT. To make the project viable, IOC had recently offered the state interest-free unsecured bonds.