Replying to a question in the state assembly raised by MLA Bhola Prasad Singh from Begusarai, Bihar minister of commercial taxes Abdul Bari Siddiqui said: "As the production of crude oil in the state is nil, no revenue is generated. Whatever entry tax we are charging is fully constitutional and has been done vide the act made on February 23, 1994 (notification number 5037) in full consultation with the Union ministry of petroleum and natural gas. Thus there is no justification of withdrawing the tax from Bihar."

The Bihar government charges five per cent entry tax on vanaspati, four per cent on motor vehicles, three per cent on tobacco, five per cent on Indian made foreign liquor, five per cent on cement amd two per cent on crude oil.

According to Siddiqui, the entry tax on crude generated Rs 1.25 crore revenue in 1992-93, Rs 13.88 crore in 1993-94, Rs 15.09 crore in 1994-95, Rs 16.9 crore in 1995-96, Rs 15.36 crore in 1996-97, Rs 20.24 crore in 1997-98, Rs 17.87 crore in 1998-99 and Rs 40.42 crore in 1999-2000. Till June 2000, the state has already collected Rs 10.35 crore from the tax.

A high-level delegation led by Indian Oil Corporation general manager Anand Kumar met the commercial tax minister here on July 3 and requested him to withdraw the crude oil entry tax as the Barauni refinery would have to shell out at least Rs 80 crore on an average per annum owing to its Rs 1,200-crore expansion plan. This tax is not levied in any other state in the country, the delegates pointed out.

IOC is enhancing its existing capacity of 3.3 MMTP to 6 MMTP. In a letter to the Bihar government, it stated: "If the production during 2001-2002 is 4 MMTP then IOC will have to pay around Rs 80 crore as crude oil entry tax. If the production for 2002-2003 is 4.7 MMTP then it would have to shell out a minimum of Rs 94 crore." In 2000-2001, the crude oil entry tax will make the state richer by Rs 66 crore.

The IOC delegation has also put forward a proposal before the state government. "We are studying the proposal. We have already lost a minimum of Rs 800 crore per annum as the Supreme Court had directed us in 1991 not to collect cess from coal production. The royalty on coal has also not been hiked since long. For development works we must collect certain taxes to generate revenue," Siddiqui told The Financial Express.

Sources in the commercial tax department said: "Unless there are other means suggested by IOC's Barauni refinery to generate revenue, it will be very difficult for us to withdraw any such entry tax."