New Delhi, Mar 10: Indian Oil Corp on Monday said the move to withdraw tax holiday to new refineries will result in lowering of profitability of its Rs 24,000-crore Paradip refinery in Orissa.

"The rate of return on capital invested in the 15 million tons a year refinery cum petrochemical plant will be lower by 1.5-2 per cent," IOC Chairman Sarthak Behuria told reporters here.

Finance Minister P Chidambaram had in his Budget for 2008-09 proposed to end seven-year income tax holiday for refineries commissioning after April 2009. The proposal would affect all proposed new refineries except that of Reliance Petroleum Ltd, a subsidiary of Reliance Industries Ltd, which expects to commission a 580,000 barrels per day export-oriented unit at Jamnagar by third quarter of the new fiscal.

The end of tax-breaks may mean up to Rs 5,000 crore outgo, company Director (Finance) S V Narasimhan said.

Oil and Natural Gas Corp (ONGC), which had planned a new 300,000 b/d refinery at Kakinada in Andhra Pradesh and doubling of capacity of its expanded Mangalore refinery to 600,000 b/d, is already reviewing its plans. "We are working on revised financials," company Chairman R S Sharma said.

India had planned to add 2.14 million b/d to its existing 2.98 million b/d capacity by 2012 to become a global refining hub.

Behuria said investment proposal for the Paradip refinery is likely to be cleared by May/June.

"We are making a representation to the Finance Minister. When there is an intent to make India a refining hub, why are we robbing it of tax incentives that are crucial for the survival of the units," he said.