IOC seeks 2,700 acres to expand Paradip petrochem project

Undeterred by its stand-off with the Odisha government over the award of fiscal incentives to its oil refinery project at Paradip, the Indian Oil Corporation (IOC) has asked for an additional 2,700 acres.

The oil marketing company said it needed the land for expanding its petrochemical complex, where new units are supposed to come up. IOC is also looking to upgrade the refinery to make it compliant with BS-VI emission norms.

“IOCL may pump in an additional investment of Rs 25,000-30,000 crore to commission new units of its petrochemical complex. They have asked for 2,700 acres of land for expansion. We have already allotted them significant land and will appraise this additional requirement”, said a senior Odisha government official.

The state government had handed over 3,344 acres of land for the 15-million tonne (mt) Paradip refinery. The land was acquired after the super-cyclone struck Odisha’s coast in 1999, in which the Paradip region was worst-affected. Land was made available to IOC at a concessional rate, and a value added tax (VAT) deferment was allowed to make the refinery project commercially available. An official source said, government land was made available to IOC during that period at only Rs 50,000 an acre. Besides, VAT deferment was allowed for 11 years from the date of commercial operations by the refinery even though it meant a blow to the state’s finances.

A memorandum of understanding (MoU) signed between the Odisha government and IOC, in February 2004, stipulated a period of 60 months for commissioning of the refinery. But, the refinery lagged this timeline by six years. What’s more, IOC ramped up capacity of the refinery project to 15 million tonne per annum (mtpa), from 9 mtpa in the original project plan. This prompted the state government to scrap the VAT concession, as the authorities said the refinery was viable with a capacity of 15 mtpa. The state government rescinded its own notification allowing VAT deferment and served a notice to IOC in February 2017, demanding payment of VAT arrears of Rs 1,485 crore. IOC contested this order in the Orissa High Court. The court has kept in abeyance the demand notice and allowed a working group two months time to settle the row.

The working group headed by Union petroleum & natural gas secretary has held two rounds of talks to overcome the deadlock but to no avail.

Sanjiv Singh, director (refineries) at IOCL could not be reached for his comments.

However, IOCL has clarified that the spat with the Odisha government would not hurt the progress of the petrochemical complex which was planned concomitantly with the oil refinery. IOCL has invested Rs 35,000 crore on the refinery. The refinery cum petrochemical complex together with the pipeline projects make IOCL the biggest investor in Odisha.