The state government is set to demand a suitable fiscal instrument from the Centre to partially offset the revenue loss for 11 years after commissioning of the 15 million tonne refinery at Paradeep by Indian Oil Corporation Ltd (IOCL).
The demand will be raised by the state finance minister Pradip Amat at the pre-Budget consultation meeting of state finance ministers to be held in New Delhi on December 26.
The IOCL refinery is scheduled to go on stream from March 2015. Since the state government has granted exemption on VAT to the oil major for 11 years from the date of commissioning of the refinery, no revenue would flow to the government during this period.
Though the exempted VAT would be ploughed back to the state exchequer after 11 years, the government will be denied cash flow to the tune of Rs 50,000 crore for the period. The loss for 2015-16 alone has been worked out at Rs 2,000 crore, said a government official familiar with the development.
The state government had allowed concession to IOCL to ensure competitiveness and viability for its refinery operations. Also, the refinery project had promised employment generation and promotion of downstream units.
The Hota committee, an expert committee appointed by the state government to suggest revenue enhancement measures, had projected that the cumulative impact on collection of Value Added Tax (VAT) from petroleum products after commissioning of the IOCL refinery at Paradeep during 2013-24 may be of the order of Rs 50,195.89 crore.
The committee observed that this will create a big dent in the state’s resources, especially because the massive expansion of the capacity of IOCL could also displace other retailers of petro goods who pay taxes.
At the pre-Budget meet, the Odisha government will also reiterate its demand for providing compensation of Rs 3,400 crore to the state due to reduction of CST (central sales tax) from four per cent to two per cent.
The government of India has so far sanctioned only Rs 1,303.08 crore (till the end of 2010-11) against the state’s demand of Rs 4,720.21 crore.
For 2011-12, 2012-13 and 2013-14, the loss accrued to the state because of cut in CST rate from four to two per cent has been computed at Rs 869.58 crore, Rs 1,087.67 crore and Rs 877.18 crore respectively.
The state government will also demand revision in ceiling for profession tax. As per Article 256 of the Constitution of India, the upper ceiling for profession tax has been kept at Rs 2,500 per annum and this has not been revised for 24 years.
