Indian Oil Corporation?s (IOC) oil refinery at Paradip has received major financial incentives from the Orissa government.
India ?s flagship oil company is setting up a 15 million tonne grassroot oil refinery at Paradip in Orissa with an investment of Rs 29,777 crore.
Sources in the Orissa government told FE that the project has been given a VAT relief besides exemption of entry tax, works contract tax, and royalty on minor minerals.
According to the agreement, between the state government and IOC, the project will be entitled to deferred payment of VAT for 11 years towards the sale of finished products, purchases of materials, machineries and equipment from the year of the commencement of the production.
While there would be no entry tax on the crude oil, work contract tax has been exempted till the date of commencement of production.
The project enjoys the exemption of royalty on sand and other minerals used for land filling, construction and other activities. Electricity duty has also been exempted for five years from the start of production. It also gets Central sales tax (CST) exemption benefit for 30 years. To facilitate the project construction, the state government has issued a gazette notification recently. At a high-level meeting, the top officials of the IOC and the state government discussed about the various financial concession accorded to the project and also the problems being faced by it.
?All the issues have been sorted out, the project work will start by December 2009/January 2010,? said the IOC director (finance), B N Bankapur. The EPC (engineering, procurement and construction contract) is being finalised for the project, he said, adding, the refinery is expected to go for commercial production sometime after March 2012.
IOC has already signed a rupee term loan agreement with a consortium of 21 lenders led by SBI for Rs 14,900 crore investment in the project.
Orissa industry secretary Sourav Garg said the petro-chemical complex project would be taken up after the completion of the refinery project.
IOC?s Paradip Refinery project will be the country?s most modern refinery with zero residue. The refinery will have a vacuum distillation unit, a crude distillation unit, a hydro-cracking unit and other secondary processing units. The project will be spread over an area of 3,344 acre.
The IOC claimed to have already spent more than Rs 1,600 crore on the project .The foundation for the project was laid by then prime minister Atal Behari Vajpayee in 2001. The state government and IOC also signed an MoU on Feburary 16, 2004 for setting up the project .
However, due to the downturn in the global refinery market, and dispute over sales tax concession to the project, the refinery project remained in a limbo.