IOC offers Odisha interest-free bonds for Paradip refinery

Indian Oil Corporation (IndianOil) has offered the Odisha government interest-free unsecured bonds to make the Rs 34,000-crore Paradip refinery viable, after the state withdrew fiscal incentives for the plant.

The Odisha government recently told IndianOil it would lose Rs 22,745-crore revenue at present value if it allowed the company to defer paying value-added tax on the refinery’s produce sold in the state for the first 11 years. This amount, it said, was expected to be Rs 9,783 crore in 2004.

IndianOil has disputed the revenue-loss figure, which it claims will be Rs 8,000-9,000 crore. “If such a waiver is not possible, the state should consider giving IndianOil a grant-in-aid or accept interest-free unsecured bonds of IndianOil or an alternative entity payable at par without interest after 99 years of their issue in full settlement of taxes, duties and charges,” the company said in a communication on January 17.

Sanjiv Singh, director (refineries), IndianOil, told Business Standard a working group constituted by the ministry of petroleum and natural gas with representatives from IndianOil and the Odisha government were looking into the matter. Sanjeev Chopra, principal secretary in the Odisha industries department, refused to comment.

According to the Odisha government, the profitability of the refinery increased because of low crude oil prices and a higher capacity configuration than planned.

The refinery was initially planned for 9 million tonnes and this was later increased to 15 million tonnes. Prime Minister

Narendra Modi dedicated the refinery to the nation last February and it is now operating at 90 per cent capacity. According to sources close to the development, the withdrawal of benefits will have an impact on Rs 50,000 crore of other planned investments in Odisha.

These include a Rs 3,150-crore polypropylene plant, a Rs 4,000-crore mono-ethyl glycol unit and subsequent pipelines and terminals.

Indian Oil Corporation