Reliance Jamnagar unit set to exhaust sales-tax incentive

Reliance Industries' (RIL) Jamnagar Refinery project is expected to exhaust its Rs 11,500 crore sales tax (ST) incentives much before its scheduled 16 year limit.

RIL has already availed ST incentive benefits worth Rs 8000 crore by the end of last financial year 2004-05. The company is expected to start repayment of deferred portion of ST incentives worth Rs 4,500 crore by 2007-08, according to RIL sources.

The year 2007-08 will also mark an end of tax sops for RIL group in Gujarat as Jamnagar refinery will not be getting any more incentives for its next phase 30 million tonne expansion, confirmed a senior state government official.

RIL sources also confirmed that company has no plans to go for ST incentives for its Jamnagar refinery expansion. The company was also offered 12 years ST incentives worth Rs 3940.18 crore for its petrochemicals projects with effect from April 1999.

The status of the petrochemicals incentives is not known. The sops were offered by the Gujarat government as part of a package to attract investment to the state in 1995.

The ST incentives were offered to Jamnagar refinery, which is considered as the largest grass route refinery in the country, under the 1995-2000 incentive scheme.

The Gujarat government had given ST incentive in the form of an option for ST exemption or deferment for 16 years, when the company set up its refinery at Jamnagar.

On petroleum products sold within Gujarat, the oil companies collect ST on behalf of RIL, which is not paid to the state government.

Under the ST scheme, which was also criticised as interest free advance to RIL group, the company started availing the benefits from 1999-2000- right from its commissioning year.

RIL sources said the company has availed 60 per cent of the benefits as complete exemption and 40 percent as deferred payment.

Data available with Business Standard indicate that the RIL Jamnagar project availed ST incentives worth Rs 513 crore in the first year of its 1999-2000 operation.

In the financial year 2000-2001 the Jamnagar project availed benefits worth Rs 1200 crore. The company benefited by ST incentives worth Rs 1200 crore again in 2001-02.

During the financial year 2002-2003 incentives availed were worth Rs 1400 crore.

With more stable operations and increased sales to PSUs, RIL availed ST benefits worth Rs 1600 crore in 2003-04.

According to sources, during the year 2004-05, ST benefits to the company touched a whopping Rs 2000 crore.

With increased sales of its petro-products, RIL has estimated that its entire remaining Rs 3,500 crore worth ST incentives would be wiped out by the end of 2006-07.

The company will have to start making payment of ST to the state. It will also be making repayment of deferred portion of the ST incentives to the Gujarat government.

The company was expected to start payment of deferred ST worth Rs 4500 crore to the Gujarat government from 2007-08.

RIL had the option of making payment in six equal installment.The company was expected to avail this option.