Govt, IOC resolve ST issue; Paradip Refinery gets a new lease of life

Dilip Bisoi

Bhubaneswar, May 16: THE Rs 8312-crore Paradip Oil Refinery project got a new lease of life with the year-long standoff between the Orissa government and Indian Oil Corp (IOC) over the sales tax issue coming to an end, following a meeting between chief minister Naveen Patnaik and IOC chairman MA Pathan, here on Wednesday.

Sources in the chief minister’s office told The Financial Express that the state government has agreed to IOC’s proposal to issue bonds with a coupon rate of five per cent redeemable in seven years in lieu of payment of sales tax to be accrued in 11 years. However, the other benefits including exemption of central sales tax (CST), purchase tax and electricity duty will be for 15 years and not 30 years as demanded by IOC.

IOC will organise a presentation on May 28 to dispel the doubts of the state government about the liquidity of the bonds that could be traded at 12 per cent discount rate in the market. IOC will also invite the top officials of financial institutions and banks to the presentation so as to convince the state government about the marketability of the bonds.

A beaming IOC chairman, who emerged from the chief minister’s chamber after an hour-long meeting, told the reporters, "We would arrive at an agreement as early as possible."

Besides Mr Pathan and Mr Patnaik, the meeting was attended by IOC director (refinery) AK Arora, Orissa chief secretary DP Bagchi and finance secretary Ajit Tripathy. Mr Tripathy said: "We are examining the operational possibility of the bond proposal."

Expressing his concern over the inordinate delay in the execution of the project, Mr Pathan reportedly told the Chief Minister that the project cost has escalated by about Rs 1000 crore because of the delay. Pointing out that the oil refineries in Gujurat and Punjab have been enjoying certain financial incentives, Mr Pathan urged the Chief Minister to resolve the sales tax issue immediately in the interest of the project.

Even though the Prime Minister, Mr Atal Behari Vajpayee, had laid the foundation stone of the nine million tonne per annum refinery about a year ago, the project was yet to make any headway because of the standoff between the state government and IOC over the issue of sales tax concession to the project.