Sunday 05 / May / 2024
New Delhi: Indian Oil Corp., the nation’s top refiner, is reconsidering plans to invest $8 billion in the country’s east after a provincial government threatened to withdraw promised tax breaks, people with knowledge of the matter said.
The government of Odisha state said in a letter to the company that it was no longer keen to provide a deferral of value added tax on the sale of petroleum products, the people said, asking not to be identified because the information isn’t public. The benefit was initially extended as an incentive to build the Paradip refinery in the state and ending it would hit profitability and impact future investments, they added. The 11-year tax deferral was for products from the refinery sold in the state.
Indian Oil has plans to invest Rs520 billion ($8 billion) in Paradip to expand the refinery, upgrade it to produce a superior quality of fuels and add downstream petrochemical units along with pipelines and storage facilities. The offer of the tax break on sales of petroleum products prompted Indian Oil to spend Rs346 billion to build a 15 million metric tonne-a-year refinery in Odisha.
Work on the Paradip refinery began in 2004 and the plant is operating at 80 per cent of capacity in the current financial year. Indian Oil is also an investor in the proposed Rs60 billion liquefied natural gas importing terminal at Dhamra in the state.
The stock rose as much as 0.8 per cent to Rs388.50 and traded at Rs385.80 as of 9:58am in Mumbai on Monday.
Indian Oil is in talks with the state government and is hopeful, a company spokeswoman said. The Odisha chief minister’s public relations officer Sukanta Kumar Panda did not respond to phone calls and an e-mail seeking comment.
The refiner has chalked out plans to spend Rs1.84 trillion through 2022 to expand its refining, pipelines and distribution infrastructure. The state-run refiner will add annual capacity of 24 million tonnes to its existing refineries over the next six years, Chairman B. Ashok said last year.
