Madhya Pradesh agrees on tax deferment to Bina refinery

In a move aimed at generating more economic activities in the state, the Madhya Pradesh government has decided to offer tax deferment to Bina refinery.
 
The refinery, after facing several hurdles since inception in 1992, came up in Bina town of Sagar district in 2011. The actual work had begun after the ruling Bharatiya Janata Party government had in 2004-2005 agreed to offer the refinery commercial tax exemption for 15 years.
 
Jointly promoted by Bharat Petroleum Corporation Ltd and Oman Oil Company (of Oman), the six-million-tonne refinery is owned by Bharat Oman Refinery Limited (BORL). It has been given tax exemption (value-added tax) since 2004 at the rate of Rs 250 crore per year for 15 years on a reimbursement basis. BORL has now decided to go for creeping investment to attain a capacity of 15 million tonnes. For this, the company had demanded tax exemptions in a similar fashion.

 

“They had demanded a similar tax exemption but the state’s Cabinet committee on investment promotion decided to offer it to them in the form of a soft loan at the rate of Rs 100 crore a year for 12 years. It is not an exemption but a deferment of payment in tax. The period and size of the sop could vary in accordance with the size of investment,” a highly placed source in the state government told Business Standard, “This concession is offered to the refinery so that more and more economic activities can be created in the proximity of the refinery.”

 
Since 2011, the company has made several statements that it will expand the capacity and may also go for a public issue to raise funds. An email seeking details of the plan did not elicit any response from the company, but a senior official in the refinery said: “This will be a creeping investment to attain 15 million tonnes (capacity). In the first phase, the investment will be Rs 3,500 crore (approximately), to increase the capacity to 8 million tonnes by 2018. Then, it will be raised to 15 million tonnes with an additional investment of Rs 18,000-20,000 crore.”

 
BPCL also operates refineries in Mumbai (12 million tonnes) and Kochi (9 million tonnes) and has a stake in the three-million-tonne Numaligarh refinery (Assam).
 
The Madhya Pradesh government had also provided the refinery land on a concessional rate, besides other concessions. Also, an exemption was offered on the entry tax for crude oil that reaches the refinery through a 900-km pipeline.