Odisha government is withdrawing interest-free credit for 11 years given to Indian Oil Corporation Limited IOCL, the Assembly was informed today.
The state cabinet approved a proposal yesterday to withdraw an incentive of interest-free credit, which is equal to the sales tax, for 11 years given to IOCL, Finance Minister Pradip Kumar Amat said.
The agreement for interest-free credit for 11 years to the refinery project was signed in 2004 and was based on the then proposed capacity of 9 mt per year, he said adding the capacity was later increased to 15 mt per year.
Amat said that the IOCL has availed exemption of about Rs 570 crore towards VAT on different contract works and entry tax for procuring equipment for the refinery. This apart, the IOCL is also not paying central sales tax, he said.
“The state government is not withdrawing exemptions and facilities being availed by the IOCL. However, the state is not able to provide interest-free credit in terms of sales tax exemption for 11 years to a profit making PSU,” he said.
The finance minister said that as per its 2004 MoU with Odisha government, IOCL was to complete the project by 2009-10 but it started commercial production in November 2015.
“The volume of interest-free credit for 11 years has now increased to Rs 69,892 crore due to delay in execution of the project. Therefore, the state government will have to sustain a loss of about Rs 22,745 crore,” Amat said.
Had IOCL completed the project by 2009-10, the state’s loss would have been only Rs 4,412 crore and the amount of interest-free credit on equivalent to sale tax would have been only Rs 9783 crore, he said.
As IOCL is a self-sufficient company capable of arranging resources on its own for proper management of the refinery, the state feels that there is no need to provide the facility of interest-free credit to it, Amat said.
The finance minister said that the state government had made several rounds of discussion with IOCL and the union ministry in this regard before taking the decision to withdraw the interest-free credit.