Bhubaneswar, Sep 20 (IANS): Indian Oil has paid Rs 2,935 crore to the Odisha government towards value added tax (VAT) for Paradip Refinery, said a statement on Tuesday.

The oil company has paid the tax for the period between November 2015 -- when the refinery commenced commercial operations -- and July 2017.

The development was a follow up of the meeting between Odisha Chief Minister Naveen Patnaik and Union Petroleum Minister Dharmendra Pradhan held in the national capital last month to resolve the VAT deferment issue between Indian Oil and the state government.

The Odisha government agreed to extend the deferment of VAT on products produced by Paradip Refinery and sold in the state from 11 to 15 years but with a cap of Rs 700 crore per year, said the statement.

Based on the follow-up discussions held in the Joint Working Group under the chairmanship of the Petroleum Secretary, and consisting of senior representatives of Indian Oil and the state government, it was agreed that Odisha government will henceforth receive regular VAT/GST revenue from Indian Oil, out of which Rs 700 crore per annum will be given as interest-free loan to Indian Oil for 15 years.

Complimenting the state government and Indian Oil for agreeing on a middle path and a mutually acceptable solution, Pradhan said that the new arrangement will give a big boost to industrial growth in Odisha.

Indian Oil's investment of over Rs 40,000 crore in Paradip Refinery and allied facilities is the single largest investment by a corporate in Odisha.

More investments are in the offing, including expansion of refining capacity, and downstream petrochemical options like Polypropylene, Mono Ethylene Glycol, Paraxylene, Petcoke gasification, which will go a long way in the development of Odisha as a petrochemicals hub.

Pradhan urged the state government to facilitate Indian Oil's expansion plans in order to create downstream petrochemical and allied industries in Odisha.

Over a period of time, this will enable the state to increase its revenue and also create additional employment avenues for the youth of the state, he said, adding that it will also lay the foundation for a new industrial ecosystem, facilitating industrialisation and fiscal consolidation.