Bhubaneswar, Aug. 19: The tussle between the Odisha Government and the Indian Oil Corporation Limited (IOCL) over tax exemption to the Paradip oil refinery ended today with both the sides climbing down from their respective positions and reaching an agreement on the issue.

The stalemate ended following a meeting between chief minister Naveen Patnaik and Union minister of state for petroleum Dharmendra Pradhan in New Delhi yesterday.

It was agreed that the state government, which had earlier demanded Rs 2,745 crore as VAT exemption, will extend interest-free loan to the IOCL, known as viability gap fund, of Rs 700 crore per annum for the next 15 years from the financial year 2016-17.

This will be given in four equal instalments in each quarter in the form of interest free loan. The IOCL will repay the loan amount from the 16th year.

On the other hand, the Odisha government will get adequate tax share from the IOCL every year.

"In 2016-17, out of the IOCL's tax collection of Rs 2,200 crore, the state will get Rs 1,500 crore. The state's share of tax will increase as the IOCL's revenue base increases over the years. If the ongoing trend continues, the state government can get tax to tune to Rs 2,200 crore to Rs 2,500 per annum," said Pradhan, briefing newspersons on the details of the agreement.

The agreement stipulated that VAT collected and not paid for the years 2015-16, 2016-17 and 2017-18 will be paid by the IOCL to the state government and Odisha has agreed to waive interest and penalty imposed on the corporation.

In the wake of the meeting between Naveen and Pradhan, officials of the state government, central government and the IOCL met today to sort out the differences. It was agreed that the two sides would file a joint petition in Orissa High Court and inform it about the new agreement.

"It's a win-win situation for both the state and the IOCL," Pradhan said today.

The meeting between the chief minister and the Union minister had taken place in the backdrop of the high court directing the working group committee comprising representatives of the state government, Centre and the IOCL to sort out the issue. However, several rounds of discussion had not yielded fruitful results with both sides remaining adamant on their respective positions.

After yesterday's meeting with Naveen, Pradhan had indicated that the state government had signed the MoU with the IOCL in 2004. But with time, the conditions of the MoU did not suit the interests of Odisha. In the larger interests of the people of the state, the MoU could be changed.