Indian Oil Plans To Expand Capacity By 5 Mln Tpa At Paradip Refinery Despite Row With State

Indian Oil plans to expand capacity by 5 mln tpa at Paradip refinery despite row with State

10-Apr-17

Indian Oil Corporation Ltd (IOCL) plans to expand capacity of its Paradip refinery from 15 mln tpa to 20 mtpa and beyond, despite its stand-off with the Odisha state government over grant of fiscal incentives to its Paradip crude oil refinery. The proposed expansion plan is aimed at generating more cash flow and improving operating margins.
"We intend an investment of Rs 4,500 crore to upgrade the Paradip refinery to roll out petroleum products that would comply with BS-VI emission norms", Sanjiv Singh, director (refineries) of IOCL told Business Standard. The company official declined to commit the timeline for expansion.

As per the original pact signed between the Odisha government and IOCL in February 2004, the government had allowed deferment in VAT payment by the Paradip refinery for a period of 11 years from the date of commercial operations of the project. The incentive was offered to ensure commercial viability of the refinery whose original capacity was pegged at 9 mtpa. Later, IOCL redrew the project design and expanded capacity to 15 mtpa. The capacity expansion coupled with the delay in commissioning of the project by the oil major prompted the state government to withdraw the incentive. The government rescinded the notification for VAT deferment and served a notice on the oil company for payment of pending VAT amounting to Rs 1485 crore. IOCL contested the notice of the government in the Odisha High Court which has kept in abeyance the demand notice and allowed a working group two months time to settle the row. The working group formed to break the deadlock between the two sparring parties, is chaired by the secretary, Union minister for petroleum & natural gas and has representation from the state government and IOCL.