The State Government has issued a show-cause notice to the Indian Oil Corporation limited (IOCl) asking it to reply as to why the provision of deferment of sales tax on the Paradip Refinery's finished products payable to the State exchequer would not be withdrawn in the public interest.
The Finance Department has issued the notice.
As per the MoU signed between the Odisha Government and the IOCl, the State was to provide fiscal incentive in shape of interest-free loan equivalent to sales tax on the finished products during the first 11 years.
In order to have employment opportunities for youths and econonomic development of the State, such incentive was granted to the 9-MMTPA project. However, the IOCl unilaterally increased the capacity to 15 MMTPA.
The State Government argued that the unilaterally-expanded project has not generated proportionate employments and infrastructure forcing the State Government to bear more financial pressure.
It again argued thatthe Paradeep Refinery does not require financial incentives for its viability after expansion.
"As the IOCl is performing much better in the oil sector in the country, it should not seek any fiscal support from the State Government for Paradeep refinery," feel the Government.
As per the MoU, it was estimated that the State's fiscal burden would be around Rs10,000 crore. However, after expansion, it is now estimated that loss of revenue would be over Rs22 000 Crore over next 11 years, sources said.
Though Paradeep Refinery was approached to pay sales tax for 2015-16 to the tune of Rs215 crore and immediate revenue impact for fiscal 2016-17 was Rs1,700 crore, the State never is yet to receive any amount.
This being the backdrop, the State Government has issued the show-cause notice to the IOCl.