Bhubaneswar, Feb. 12: The state government, which is passing through a financial turmoil, reckons that the 11-year deferment of tax collection from Indian Oil Corporation Limited for its Paradip oil refinery project would affect its finances.

Finance minister Pradip Amat today told The Telegraph: "We have taken up this issue with the Union finance minister Arun Jaitley in different meetings and informed him how Odisha is going to suffer financially on account of deferment of taxes. We have urged him to develop a mechanism, so that the state does not incur losses on this score."

The state government has also raised the issue with the ministry of petroleum and natural gas and asked it to have a re-think on the issue. Odisha now has to depend on central assistance and taxes. Hence, the state government has decided to present its regular budget only after the Union budget has been presented.

Amat said a large number of people, who had sent their suggestions for shaping the state budget, were of the view that tax deferment issue should be reconsidered. "We are on the look out for possible mitigation measures with the central help," said Amat, adding that a committee had been formed to look into the matter.

In another development, former finance ministers Prafulla Chandra Ghadei and Panchanan Kanungo also lent their voice to the demand for the review of tax deferment decision. According to a preliminary estimate, the state government will lose around Rs 23,000 crore to Rs 25,000 crore on account of tax deferment.

Ghadei, who had been the state's finance minister from 2004 to 2012, said: "According to the agreement signed in 2004 between the state government and Indian Oil, the state is not to impose value added tax (VAT) for a period of 11 years. As the project was scheduled to be over by 2008, the deferment of tax collection should be only up to 2019 and not 2027 as demanded by the oil company."

Ghadei also took up the issue at the pre-budget consultancy meeting of the state government. "Tax concessions to Indian Oil's Paradip oil refinery project should be withdrawn in public interest since it is no more justified in the present scenario when price of crude oil has fallen steeply in the international market."

Former finance minister Panchanan Kanungo said: "The deferment of taxes for the Indian Oil Corporation should not be for more than five years at present. The deferment of taxes for 11 years will hit the economy of the state."

Kanungo had been the state's finance minister from 2002 to 2004.

A fresh agreement between the company and the state government has become necessary as Indian Oil, which was initially to set up a nine-million-tonne refinery, has enhanced its capacity to 15 million tonnes. Besides, there has been a delay of five years in the commissioning of the project. "No downstream industries been set up till now. We had expected that that the losses on account of deferment of tax collection from Indian Oil will be compensated by the tax collection ancillary units, but this has not happened," said a state government official. Sources, however, said the company was unwilling to re-negotiate the agreement.

As the debate continues on the issue of tax concessions to the company, a BJP delegation yesterday met director-general of police K.B. Singh and submitted a memorandum demanding action against BJD leaders, including Cuttack-Barabati MLA Debasis Samantray and Niali MLA Pramod Mallick, for allegedly trying to stop party supporters from reaching to the meeting venue where Prime Minister Narendra Modi on February 7 dedicated the Rs 35,000 crore Paradip oil refinery to the nation. They also alleged that the two legislators had sought to terrorise the people and the BJD supporters also ransacked Tirtol police station.

The BJP also demanded action against Jagatsinghpur police superintendent Sudha Singh for remaining a mute spectator to the alleged violence unleashed by the BJD leaders in and around the Prime Minister's meeting venue. The party delegation sought the immediate release of 13 BJP workers, who are languishing in jail following their arrest on February 7.