IOC May Move Court if Odisha With­draws Paradip Tax Sops

State feels fis­cal sops ‘un­nec­es­sary and un­jus­ti­fied’ as co’s do­ing well

The Economic Times - - Economy: Macro, Micro & More - San­jeev.Choud­hary @ times­group.com

New Delhi: In­dian Oil Corp (IOC) may go to court if the Odisha govt car­ries out its threat to with­draw tax in­cen­tives to its Paradip Re­fin­ery, in a con­fronta­tion that could dent the state’s cred­i­bil­ity as an in­vest­ment des­ti­na­tion.

Odisha had is­sued a no­tice to the com­pany last month, say­ing the eco­nomic en­vi­ron­ment had “dras­ti­cally changed in favour of In­dian Oil Corp” so that fis­cal in­cen­tives for Paradip Re­fin­ery have be­come “un­nec­es­sary and un­jus­ti­fied”.

It cited dereg­u­la­tion of fuel prices, ex­pand­ing re­fin­ing mar­gins and prof­itabil­ity of IOC, ca­pac­ity ex­pan­sion at the re­fin­ery, and de­lay in build­ing it as key rea­sons for seek­ing to with­draw tax sops.

In its re­sponse, IOC re­jected all ar­gu­ments by the state and said it was “not fair” to with- draw tax in­cen­tives now.

“If it must with­draw the in­cen­tives, then the state govt shall ac­cept in­ter­est-free un­se­cured bonds of IOC or al­ter­na­tive en­tity payable at par with­out in­ter­est after 99 years of their is­sue in full settlement of tax(es)/ duty (ies)/ charge(s),” the com­pany has writ­ten to Odisha, quot­ing the pro­vi­sion from the agree­ment be­tween the state and IOC, which pro­vides for fis­cal in­cen­tives.

A per­son close to the com­pany’s man­age­ment said, “If Odisha doesn’t stick to the terms of the agree­ment, IOC will have no op­tion, but to go to court to en­force that.” The per­son said such a move will im­pact the state’s cred­i­bil­ity. “It’s painful. Busi­ness can­not go on like this. If gov­ern­ments go back on the com­mit­ment, it would be ex­tremely dif­fi­cult to trust gov­ern­ments,” the per­son said.

Odisha, in its no­tice, had said it would lose rev­enue of .₹ 22,745 crore on the present value ba­sis by al­low­ing IOC to de­fer pay­ing Value-Added Tax (VAT) on the re­fin­ery’s en­tire pro­duce sold in the state for the first eleven years of com­mer­cial pro­duc­tion, IOC has re­jected this es­ti­mate and pegged the amount at .₹ 8,000-9,000 crore.

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