The panchayat polls in Odisha are done and dusted but the battle of one-up manship between the ruling Biju Janata Dal (BJD) and Bharatiya Janata Party (BJP) has taken a nasty turn. Caught in the crossfire right now is Indian Oil Corporation Ltd’s (IOCL) oil refinery at Paradip after the BJP put up a remarkable show in the polls. The Odisha government’s decision to roll back fiscal incentives to the Rs 34,555 crore project, dedicated to the nation by Prime Minister Narendra Modi only a year back, has brought the two on a path of confrontation once again.
There already have been a flurry of verbal exchanges between the two sides over the issue and both have flashed the “Odisha interest” card. The Naveen Patnaik administration justifies its decision saying that it would prevent a huge loss to the exchequer and that there is no real time employment opportunity for the State’s youth. Not to be browbeaten, the Union Minister of State for Petroleum and Natural Gas Dharmendra Pradhan, the obvious target, attributes the unexpected harsh decision on Indian Oil to the saffron party’s surge in the panchayat elections.
“You (Naveen Patnaik) can be angry with me, my party or the Prime Minister, but you should not harm the State’s interest by withdrawing tax sops to the Paradip refinery,” was
his retort.
The State Cabinet on February 22 decided to withdraw the incentive for deferred payment of VAT for 11 years which was given to the refinery project as part of the MoU with IOCL. Some other time, it would have passed off as the State’s decision to protect its financial interest. But coming within days of a not-so-impressive performance by the ruling party in the panchayat polls, it gave an impression that the BJD was trying to arm-twist IOCL for political advantage.
The government maintained that the deferred VAT will amount to a staggering Rs 69,892 crore because of the delay in commissioning of the plant by nearly six years, from 2009-10 to 2016. This, it claimed, would inflict a loss to the tune of Rs 22,745 crore on State’s exchequer. When the MoU was signed between the State and IOCL, the deferred VAT amount (or the interest free loan) was calculated at Rs 9,783 crore and loss to the exchequer was estimated at Rs 4,412 crore. That
was in 2004.
However, what prompted the State to withdraw the tax deferment to the refinery a year after its commissioning when a high- level panel with senior officials of the Centre, State and IOCL as members was still trying to resolve the dispute begs answers. Why did it take the BJD government so long to find out that it would incur heavy losses?
Going by finance minister Pradip Amat, the government initiated the process for withdrawal of incentive last year. The State Cabinet decided to roll back the provision of VAT deferment and issued a showcause notice to IOCL on December 29, 2016. The reply by IOCL was rejected by the State Cabinet on February 22.
While accusing IOCL of violating the MoU, the BJD government said the profit-making PSU is capable of raising resources on its own and needs no incentives by the way of interest-free loan and deferred payment of VAT. It has also charged IOCL with not paying VAT amounting to Rs 1,485 crore for 2015-16 and 2016-17.
The IOCL, on the other hand, has rubbished the claims. The impact of the interest-free loan as calculated by the Odisha government is “astronomically high” and on discounted value, should be in the range of Rs 8,000 to Rs 9,000 crore as compared to Rs 22,745 crore claimed by the
State, it said.
While the BJD government said it was not kept in the loop about capacity augmentation of the refinery from 9 million tonne to 15 million tonne, the IOCL said the MoU itself allowed for the change and attributed the commissioning delay to land acquisition, law and order situation at the site and back-to-back cyclones which affected pace of
the project.
This bitter battle has not only cast a shadow on the project, billed as the single largest investment in the State, it has also put a question mark on the downstream and ancillary industries. Going by its posturing, there is every likelihood that IOCL might drag the government to the court of law for breach of trust. Besides, it already has hinted that future investments in the project may be re-assessed in such emerging situations.
For a State seeking to push its pace of industrialisation, it is pure bad news because the past is replete with examples of failed projects.
Instead of attempting to derive political brownie points ahead of the elections, both sides must sit across the table and resolve it, not fire verbal salvos at each other and play to the gallery.For, this is not the time for narrow political gains.