Iffco had mooted a three-way joint venture of the state co-operative sector, Iffco and the FACT Employees Co-operative. It had said that it would provide some seed capital and technical and managerial support, besides insisting that the Centre write off the loan and the state government do away with the entry tax on petroleum products and reduce the power tariff. Chief minister AK Antony during his meeting with the Prime Minister in Srinagar last month sought a postponement of the disinvestment of FACT for three months within which time it would submit a detailed proposal.
With no move being made so far by the state government to go ahead with the proposal and no communication received from the Centre regarding postponement of the disinvestment process, the co-operative proposal remains standstill.
However, it is learnt that the two companies that had evinced interest in the company, Indo-Gulf Fertilisers and Deepak Fertilisers, have readied their due diligence report and were awaiting the Centres announcement for submission of price bids.
IFFCO managing director US Awasthi had earlier during his visit to FACT had said that as an initial move the state government needed to do away with the entry tax on petroleum products and rationalise the tax structure. However, there has been no such indication from the state governments part and instead Kochi Refineries Ltd has come out against any move to scrap the entry tax. It has said instead the government should consider reducing the sales tax.
The entry tax on petroleum products was as high as 32 per cent and the sales tax on input materials 14 per cent. FACT which reported a Rs 70-crore loss during the first quarter of this fiscal was contributing Rs 90 crore by way of duties and direct taxes and another Rs 80 crore through non-direct taxes annually.
Top officials in FACT say that if the government is keen on going forward with the proposal to have FACT in the co-operative sector, as a first step it should consider the companys request for tax waiver.