New Delhi, August 20: State-owned Indian Oil Corp (IOC) will invest about Rs 52,000 crore in expanding Paradip refinery and setting up petrochemical complex after the Orissa government agreed to restore part of tax incentives, a top source said.
After the deal reached with state government Friday, IOC will go fullstream with expansion of Paradip refinery capacity by 5 million tons a year as well as set up a polypropylene plant and a monoethylene glycol production facility in 4-5 years, he said.
The state government has agreed to give Rs 700 crore per annum of interest-free loan for 15 years to make up for the withdrawn incentive of 11-year deferment on payment of sales tax on Paradip refinery products sold in the state.
IOC will also withdraw a legal challenge moved at the Orissa High Court against the state government’s decision to withdraw signed commitment.
The Rs 700 crore interest free loan for 15 years is equal to the tax incentives Rajasthan has recently extended for setting up of a refinery in Barmer by HPCL. It is also similar to the tax breaks given by Punjab for Bhatinda refinery and Madhya Pradesh for the Bina unit, he said.
The source said IOC and Orissa government will sign an addendum for the original tax incentive agreement of 2004.
In the revised agreement, 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, he said adding the repayment of the amount will start in 16th year for each instalment.
The source said the VAT deferment was only on products sold in the state, which is about 2 million tons annually.
VAT collected and not paid in 2015-16, 2016-17 and 2017 -18 will be deposited by IOC immediately. Orissa government will provide interest-free loan to IOC for 2016-17 and three quarters of current year by December 2017 or January 2018 and every quarter thereafter.