Odisha to lose Rs 2,174 cr in FY17 on VAT deferment to IOCL

State govt is in talks with Union petroleum ministry to reconsider VAT deferment mentioned in pact with Indian Oil

Odisha is set to lose Rs 2,173.91 crore in 2016-17 due to deferment of value added tax (VAT) to Indian Oil Corporation's 15 million tonne crude oil refinery at Paradeep.

According to a pact signed by the Odisha government with Indian Oil Corporation Ltd (IOCL), VAT deferment is for a period of 11 years from the date of commercial operations of the refinery. The tax concession was extended to the oil major considering its operational viability and the multiplier effect the refinery would have on local employment and the region's economic growth.

Odisha's finance minister Pradip Amat said, the state government is in negotiations with the Union ministry of petroleum and natural gas to reconsider the VAT deferment mentioned in the pact. The state government argued that since the IOCL refinery was already delayed by over three years, the tax concession seemed unjustifiable. Moreover, the refinery capacity was expanded to 15 million tonne per annum (mtpa) compared to nine mtpa envisaged originally.

An expert committee on revenue enhancement had questioned the tax sops to IOCL refinery, saying it would have a debilitating impact on the state's resource base.

IOCL had earlier clarified there was no issued with the Odisha government on VAT deferment and the tax sops were essential to ensure commercial viability of the project.

IOCL has commissioned the Paradeep refinery at a cost of Rs 34,555 crore. the refinery would roll out BS-IV compliant products from Day one and is also capable of producing BS-VI products.

The Paradeep refinery is capable of processing 100 per cent high sulphur, including 40 per cent heavy crude oil of low cost. The refinery would churn out a wide gamut of petroleum products like petrol, diesel, kerosene, aviation turbine fuel (ATF), propylene, sulphur and petroleum coke.

The Paradeep refinery product mix would consist of 37.5 per cent high speed diesel, 25.3 per cent motor spirits, 13.1 per cent ATF, 5.2 per cent propylene+LPG, 8.1 per cent petroleum coke and 1.8 per cent sulphur. The products would be predominantly consumed in the domestic market except few quantities of motor spirits which would be exported.

It has unique INDMAX (Indane Maximization) technology with 4.17 million tonne capacity capable of delivering up to 44 per cent LPG.