By Bizodisha Bureau, Bhubaneswar, February 24, 2017 : The Odisha government has withdrawn from its agreement with Indian Oil Corporation Ltd (IOCL) over the interest-free loan to Paradip Refinery.

The proposal to withdraw from the agreement was taken at the state Cabinet meeting on Wednesday; finance minister Pradip Amat on Thursday told the Odisha Assembly.

In February 2004, the state government had entered into an agreement with IOCL to provide interest-free loan among other incentives. It agreed to provide fiscal incentives for setting up a 9 million tonnes a year oil refinery at Paradip by 2009-10. However, the project was delayed and started only in early 2016.

However, as per the agreement, IOCL would have paid back the sales tax amount after 11 years albeit without interest.

The state government on December 29, 2016 through a notice to IOCL asked why the fiscal incentives like 11-year deferment of sales tax on petroleum products sold in the state should not be withdrawn considering that the Rs 34,555 crore refinery was delayed by over six years.

“The Central government has not provided any incentive to IOCL. The state government has provided eight incentives to IOCL. The government has already offered the seven of the incentives and is withdrawing one incentive-interest free loan. The project was delayed by seven years. That apart, IOCL has expanded its capacity unilaterally. Moreover, IOCL is a profit making company, it doesn’t require an interest-free loan,” stated the Finance Minister.

The state exchequer would have sustained a loss of Rs 22,754 crore had it committed to interest free loan to IOCL, informed Amat.