The future of Rs 35,000-crore oil refinery of Indian Oil Coporation at Paradip is now in jeopardy after the Odisha government on Thursday said it was unable to provide a 99-year-interest-free unsecured bond to the oil PSU. While inaugurating the Paradip-based 15-million-tonne per annum refinery in February last year, Prime Minister Narendra Modi had dubbed it as “gateway to the east” that would bring light to the lives of lakhs of homes of Odisha.
During the inauguration, Modi also left no one in doubt that Union Minister for Petroleum and Natural Gas Dharmendra Pradhan would be the party’s chief ministerial face in the state. Many in the BJP and the ruling BJD in Odisha view the IOC refinery as Pradhan’s vehicle to propel the party to power in Odisha in the next Assembly polls. The refinery is also the biggest industry in the state.
But just days after the BJP stunned everyone winning over 300 zilla parishad seats and getting majority in 8 districts, the Naveen Patnaik government seems to have thrown cold water on Pradhan’s plans by withdrawing all fiscal incentives that made the PSU venture to Odisha in 2004. The Odisha government which recently turned down the company’s requests to defer payment of value added tax on the refinery’s produce for first 11 years, has now refused to buy the company’s interest-free unsecured bonds equivalent to the amount.
Odisha finance minister Pradip Amat told the state Assembly on Thursday that the interest free unsecured bond for next 11 years would be around Rs 69,892 crore which is a huge loss to the state exchequer. “In the present value, Odisha is expected to lose Rs 22,745 crore in revenue if it allowed the company to defer paying value-added tax on the refinery’s produce sold in the state for the first 11 years. The state government needs financial resources for NREGS, National Food Security Act and Right to Education Act. At least 25 per cent of the VAT comes from petroleum products. If the state gives VAT incentive, its proposed expenditure on social schemes would be greatly affected,” Amat said.
The state government said had the refinery been commissioned in 2009 as scheduled, the state would have given interest free unsecured bond of Rs 9,783 crore only. There was inordinate delay in commissioning of the plant, the government said, adding that though the fiscal incentives that were promised for the refinery was for 9 MTPA capacity, the oil PSU had increased capacity without signing a fresh MoU.
Sources in Indian Oil said the withdrawal of benefits would severely impact the planned investment of Rs 50,000 crore in Odisha including a Rs 3,150-crore polypropylene plant, a Rs 4,000-crore monoethyl glycol production unit, a petroleum coke evacuation project, an LPG import terminal, a 670 km Paradip-Durgapur pipeline and an 1,150 km Paradip-Hyderabad petroleum product pipeline. The company officials also disputed the revenue-loss figure, saying it wouldn’t be more than Rs 8,000-9,000 crore.
Explaining its six year delay in commissioning, Indian Oil in its reply to the state government last month had attributed it to local protests, theft at the site and the extra fortification required for the refinery at the cyclonic zone. Company officials said PSU is likely to reconsider plans to invest Rs 52,000 crore on expansion of the refinery in Odisha as refinery activity as a low margin activity subject to wild fluctuations due to crude prices volatility.
State BJP president Basant Panda said the government’s move showed its lack of keenness in taking ahead the ‘Make in Odisha’ programme. “It’s a matter of great shame that the government wants to jeopardise the future of refinery and lakhs of Odia youths just to spite Dharmendra Pradhan,” said Panda.