The Centre has made it clear that it cannot provide any special package to the State for estimated revenue sacrifice on account of VAT loss for the Paradip Refinery of the Indian Oil Corporation limited.
The Centre’s views have come in response to Chief Minister Naveen Patnaik’s demand for compensation towards the State’s loss for the IOCl project at Paradip. Patnaik had raised the issue when he met Prime Minister Narendra Modi on October 6 last year.
Union Minister for Petroleum and Natural Gas Dharmendra Pradhan has said in a letter to the Chief Minister, “It is expected that the fiscal incentives provided by the State Government would spur economic growth through setting up of ancillary industries and diversification of industrial activities, which in turn would substantially increase the income, output, employment and hence tax earnings of the State. This would have a very large beneficial impact on the socioeconomic condition of the State.”
However, Pradhan has not directly refused to sanction any compensation package for the State to overcome the revenue loss for exempting tax on the IOCl’s refinery project. He has remained silent over the issue. Among the concessions provided by the State, a major amount is involved only in case of deferment of VAT on petroleum products for a period of 11 years.
This amount is estimated to be of the order of Rs1,400 crore in 2015-16, said Pradhan. But according to officials of the State’s Finance Department, the VAT loss would be around Rs 2,000 crore annually.
Pradhan has highlighted that the Paradip Refinery would generate additional excise revenue of about Rs15,000 crore per annum, out of which a share would be received by the State Government. This would translate into an additional actual to the State of about Rs300 crore, Pradhan pointed out in the letter.
While making efforts to convince the State Government that it would gain otherwise, Pradhan said because of the location of the refinery, a few more large projects in the petrochemical sector are also being considered. The polypropylene project with an investment of Rs3,150 crore has already been sanctioned and is under implementation. Stage-I approval of MEG (Mono Ethyl Glycol) project has already been approved in February 2015 with an estimated cost of Rs3,752 crore, he pointed out.
Feasibility of a few more projects like PX-PTA and Petcoke gasification is also being studied. Various downstream industries in the field of polyester chips and fiber, PET bottle grade chips, PET film grade chips, polyester industrial yarn, PET resigns for bottles and packaging would also be set up, Pradhan said.
He also pointed out that most of the States where new refineries are set up do extend similar concession. For example, VAT deferment for 15 years has been provided for refineries at Bina and Kochi by the Government of Madhya Pradesh and Kerala, respectively. Similar concession is provided by the Government of Punjab for the refinery at Bhatinda. These States have also provided other concessions similar to the Odisha Government’s, said Pradhan.