State Government grants incentives to two oil refineries proposed in Andhra Pradesh PCPIR

12-Jan-12

The State Government has issued controversial orders granting a string of incentives to two oil refineries proposed in Petroleum, Chemicals and Petrochemical Investment Region (PCPIR) developed between Visakhapatnam and Kakinada. As per The Hindu, GO Ms. No. 7 mentions the incentives being given to Amerind Petroleum Pvt. Ltd. for relocating a closed oil refinery from the United States near Atchutapuram, about 50 km from Visakhapatnam. The company will relocate the machinery to launch 7.5 mln ton refining at a cost of Rs.2,500 crore in first phase. It will invest Rs.7,750 crore for adding another 7.5 mln ton in second phase along with a petrochemical complex. GO Ms. No. 6, also issued on the same day (i.e. 10.01.2012) grants the incentives to Al Qebla Al Waytya Inc. (A.K. Group), Kuwait for setting up a crude petroleum refinery. It sought 1200 acres near a deep water port for its proposed 4,00,000 bpd in two phases at a an investment of US$2 billion. For the project by Amerind being a second-hand refinery benefits under Industrial Investment Promotion Policy (IIPP) 2010-15 will be offered by giving an exemption. Being second-hand unit, it is not entitled to mega project status as per GO Ms. No. 29.06.2010. The GOs give the Kuwaiti company 25% VAT/CST and CST for five years, 45% VAT and CST thereafter limited to two times the investment made by the company whichever is earlier. The company is eligible to VAT reimbursement only if the sale price of its product is same as the index price of Government of India. In case of disbanding of index price, market price as decided by the Commercial Taxes Department should be taken into account. Amerind, as per the GO relevant to it, gets 100 per cent reimbursement of stamp duty and transfer duty paid by the industry on purchase of land meant for industry use, 25% VAT/CST/State Government Sales Tax for five years from date of production and 50% reimbursement on skill upgrading. Incentives listed in IIPP will be extended to both the projects. As per the AP Infrastructure Development Enabling Act, 2001, mega projects should follow competitive bidding. In the case of both, Amerind and the Kuwaiti company, the provisions in the Act were not followed.