State-owned Indian Oil Corp (IOC) has sought a two-year extension of tax breaks available for refineries so that its delayed Rs 29,777 crore Paradip refinery can avail of the benefit. Exemption or holiday, under section 80IB(9) of Income Tax Act, from payment of income tax on revenues earned from refining of crude oil is available to units that are commissioned by March 2012.
This deadline was set keeping in mind the commissioning schedule given by IOC for its 15 million tons a year Paradip refinery in Orissa, official sources said.
However, Paradip refinery is running way behind that schedule because of law and order problems and issues related to land acquisition and is now expected to be commissioned in September 2013.
Sources said IOC made the request for extension of tax holiday to the oil ministry, which in turn has forwarded the same to the finance ministry for consideration.
Currently, refineries commissioned after March 31, 2012, will not be eligible for exemption from payment of income tax on revenues earned in the first seven years of operations. The seven-year income tax holiday for the refining sector ends next year.
IOC plans to sell fuel produced at the Paradip unit in the domestic market, rather than export the products as was earlier planned, due to the rise in fuel demand at home.
The refinery was originally planned to export at least 2.05 MT of petrol and 124,000 tonnes of naphtha out of its yearly output of 15 million tonnes. But double-digit growth in petrol and diesel consumption meant there would be very little left for exports.
The Paradip refinery will produce 5.97 MT of diesel, 3.4 MT of petrol, 1.45 MT of kerosene/ATF, 536,000 tonnes of LPG, 124,000 tonnes of naphtha and 335,000 tonnes of sulphur, all of which will be for sale in the domestic market.
Some of the 200,000-tonne propylene output of the plant may be exported, the company had earlier said.
IOC had previously stated that the refinery will start producing fuel by March, 2012, when it will commission primary units like the Crude Distillation Unit. Secondary units will be commissioned by July, 2012, and operations stabilised by November, 2012.
The Paradip refinery is being configured to process the toughest, heaviest and dirtiest crudes, which are cheaper than the cleaner and more easily processed varieties.
The refinery will have a Nelson Complexity Index of 13, the highest in the world.