Indian Oil Corp., the nationâ€™s top refiner, is reconsidering plans to invest $8 billion in the countryâ€™s east after a provincial government threatened to withdraw promised tax breaks, people with knowledge of the matter said.
The government of Odisha state said in a letter to the company that it was no longer keen to provide a deferral of value added tax on the sale of petroleum products, the people said, asking not to be identified because the information isnâ€™t public. The benefit was initially extended as an incentive to build the Paradip refinery in the state and ending it would hit profitability and impact future investments, they added. The 11-year tax deferral was for products from the refinery sold in the state.
Indian Oil has plans to invest 520 billion rupees ($8 billion) in Paradip to expand the refinery, upgrade it to produce a superior quality of fuels and add downstream petrochemical units along with pipelines and storage facilities. The offer of the tax break on sales of petroleum products prompted Indian Oil to spend 346 billion rupees to build a 15 million metric ton-a-year refinery in Odisha.
Work on the Paradip refinery began in 2004 and the plant is operating at 80 percent of capacity in the current financial year. Indian Oil is also an investor in the proposed 60 billion rupee liquefied natural gas importing terminal at Dhamra in the state.