New Delhi: Finance Ministry has restricted tax holidays to only new refineries run by public sector firms and has barred units under construction by private sector companies like Essar Oil from the benefit.
Finance Ministry on 30 May notified eight projects like Indian Oil Corporation’s Paradip refinery, HPCL-Mittal’s Bhatinda unit and Bharat Petroleum Corporation’s Bina plant for extending seven-year holiday from payment of income tax.
“Besides 15 million tonnes Paradip refinery, 6 million tonnes Bina project and 9 million tonnes Bhatinda unit, it also listed Oil and Natural Gas Corporation’s 3,000 barrels per day and 1,500 bpd mini-refineries at Gandhar in Gujarat and Tatipaka in Andhra Pradesh,” official sources said.
Other projects eligible for tax breaks include Phase-III expansion of Mangalore refinery by 5.31 million tonnes, Visakh refinery expansion of Hindustan Petroleum, and 3 million tonnes capacity expansion of IOC’s Panipat refinery.
The seven-year income tax holiday to refineries will be available before March 2012 only if they are owned by public sector company or built by companies where state-run firms have 49% stake.
“For the refineries to be eligible for the tax sops they should have been notified before 31 May, 2008 and only eight projects have been notified,” sources said.
These conditions have kept out refineries planned by Essar Oil at Vadinar in Gujarat, Nagarjuna Oil at Cuddalore in Tamil Nadu and Cals Refineries at Haldia in West Bengal out of the tax benefit purview as they neither have public sector equity nor have been notified.
Sources said even though work on private sector refineries began much before the sunset clause was introduced, the Finance Ministry has ignored their cause.
Level playing field
Essar, which is expanding its 10.5 million tonnes Vadinar refinery to 34 million tonnes, had written to Prime Minister Manmohan Singh, saying the move would severely affect the viability of the project and its financial interest would be jeopardised.
Vadinar expansion is to be completed before the public sector refineries come on stream.
“This will make it impossible for our refinery to compete with (Paradeep, Bina or Bhatinda) refineries as well as other existing refineries as both refineries in the past and also the upcoming refineries being built will enjoy this benefit whereas Essar Oil will not be treated at par,” the company wrote to the Prime Minister.
“It is very unfortunate that the proposed amendment would be discriminatory to private sector refineries and will make private sector investments unviable,” it said seeking level playing field by removing the inequality.
Nagarjuna Oil is building a 6 million tonnes refinery in Tamil Nadu while Cals Refineries is assembling a 5 million tonnes unit at in West Bengal.