IOC May Move Court if Odisha Withdraws Paradip Tax Sops
State feels fiscal sops ‘unnecessary and unjustified’ as co’s doing well
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.