PetroMin seeks 2-yr extension of tax holiday for refineries

A tax holiday is currently available to units that are commissioned by March 31, 2012, under section 80IB(9) of the Income Tax Act (exemption from payment of tax on income earned from refining).

IOC's 15 million tonnes a year Paradip refinery is running behind schedule because of several problems the company has faced in executing the mammoth project in Orissa, officials said. The biggest of these were law and order problems and issues related to land acquisition, which have delayed the project commissioning to September, 2013, from the previous schedule of the first quarter of 2012.

Officials said owing to issues beyond its control, IOC had asked the Oil Ministry to seek a two-year extension of the tax holiday till March, 2014. The Oil Ministry, in turn, has written to the Finance Ministry requesting the same.

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.