Essar Oil raises $1 billion loan to pay sales tax

Essar Oil said it has tied up credit arrangements worth Rs 5,000 crore from Indian banks to pay its sales tax bill of Rs 6,169 crore.

Essar Oil is a subsidiary of Essar Energy, listed on the London Stock Exchange as ESSR.

In April this year, the Supreme Court of India had rejected Essar Oil’s review petition, making it necessary for the company to pay the amount (in excess of $1 billion) in tax levies to the Gujarat government.

The Gujarat government had started taking coercive steps over the last few weeks, seeking the money. Essar had then approached the Supreme Court again.

Last week, the Supreme Court asked Essar Oil to pay Rs. 1,000 crore to the Gujarat government towards sales taxVAT dues by July 30th.

Essar Oil has already recognised this liability in its quarterly accounts for the quarter ended Dec 31, 2011.

“The company continues to pursue the matter of repayment schedule of its sales tax liability both legally and with the Gujarat State Government,” the company, part of the Essar group, said.

“The completion of the Vadinar refinery phase 1 expansion and the early completion of the additional optimisation project at Vadinar complete the scheduled capex programme for the refinery. With its benchmark low operating costs and enhanced scale and complexity, Vadinar is expected to deliver significantly enhanced margins and cash flow generation in future,” Essar Oil said.