Odisha government, which had withdrawn tax incentives to the Rs 34,555-crore Paradip refinery of Indian Oil Corp (IOC), has agreed to restore some of the tax breaks, including a Rs 700-crore per annum of interest-free loan, Oil Minister Dharmendra Pradhan said on Saturday.
"It is agreed that state government will give Rs 700 crore per annum interest-free loan for 15 years; earlier state head agreed to provide total deferment of VAT," Pradhan said Twitter post.
IOC and the state government agreed to the revised terms at the meeting called at the behest of Pradhan.
The Odisha government had on February 22 written to IOC, its single-biggest investor, saying it is withdrawing the promised 11-year deferment on payment of sales tax on Paradip refinery products sold in the state.
The withdrawal was to cost Rs 2,000 crore to IOC this year and will progressively increase every year as more petrol, diesel and petrochemicals are sold within the state.
The company dragged the state government to court for walking back on its commitment and has not paid VAT on products sold in the state since commissioning of the refinery last year.
The agreement on interest-free loan for 15 years would give additional revenue to the state, Pradhan said.
"This would give a substantial amount of additional #revenue (Around Rs 1,500 crore per year) to the state of #Odisha. #ParadipRefinery," he said in another tweet.
"This is a historic day for people of #Odisha; dwellers of the state have got their dues without spoiling the industrial atmosphere of the state," he added.
Sources said, in the latest agreement reached, the viability gap funding for Paradip refinery project will be revised to Rs 700 crore per annum payable in four equal instalments in each quarter in the form of interest-free loan for 15 years starting from financial year 2016-17.
IOC will deposit applicable VAT or GST on products sold.
Odisha government will pay the viability gap fund in the form of interest-free loan in each quarter. The repayment of the amount will start in 16th year for each instalment, they said.
VAT collected and not paid in 2015-16, 2016-17 and 2017 -18 will be deposited by IOC immediately. Odisha government will provide interest-fee loan to IOC for 2016-17 and 3 quarters of current year by December 2017 or January 2018 and every quarter thereafter.
Sources said the state government has also agreed to waive interest/penalty for the VAT withheld by IOC.
A joint petition will be filed in the Orissa High Court, Cuttack informing about the agreement, they said.