By Bizodisha Bureau, Bhubaneswar, September 13, 2016 : Odisha is likely to lose more than Rs 2,000 crore in 2016-17 due to deferment of value added tax (VAT) to Indian Oil Corporation’s [IOCL] Paradip oil refinery.

“It is apprehended that the total deferment of VAT, being availed by IOC (Paradip Oil Refinery) unilaterally in violation of the provisions of the OVAT ACT, is likely to exceed Rs 2,000 crore in 2016-17, which will be 11.42% of the commercial tax target of Rs 17,500 crore fixed by the state government for FY 2016-17,” Commercial Tax Commissioner Saswat Mishra said in a letter to additional chief secretary R Balakrishnan on Monday.

In a letter to Additional Chief Secretary (Finance), Mishra made it clear that such a huge loss cannot be compensated by any other means. Mishra claimed that August collections for the state would have grown 14.02% had it not been for the Rs 531.96-crore discount given to IOC on account of the tax deferment and commercial tax collections for the month posted a mere 4.02% rise.

“The below par growth rate is mainly on account of deferment of Rs 531.96 crore availed by IOCL’s Paradip refinery, which is 9.62 per cent of cumulative collection till August,” said Mishra.

When the MoU for the refinery was inked in 2004, Odisha had agreed to defer for 11 years collection of value added tax (VAT) on products from the plant, originally of 9-million-tonne-per-annum capacity, on condition that the plant must go on stream by 2009.

The tax concession was extended to IOCL considering its operational viability, local employment and the region’s economic growth.

IOCL has commissioned the 15 million tonne crude oil refinery at Paradip at a cost of Rs 34,555 crore. The refinery began commercial production early this year.

The Naveen Patnaik government is reluctant to agree on this expensive promise and has informed the Centre about its concerns in the past. Senior officials of his government have held two meeting with officials of IOCL and the Ministry of Petroleum and Natural Gas this year. Meanwhile IOCL has begun availing this deferment of value added taxes.

Odisha had earlier this year raised the tax rate on petrol and diesel from 23% to 26%. Mishra pointed out that the state was not getting the corresponding benefits because of the tax relief to IOC, which claims 65% share of the market. He said that the oil PSU was pushing products from the Paradip refinery more aggressively and districts like Koraput, Rayagara, Nabranpur and Malkangiri, which were earlier serviced from Vizag, were now being supplied from its Jatani depot near Bhubaneswar.