State-owned Indian Oil Corp (IOC) will invest about Rs 52,000 crore in expanding Paradip refinery and setting up petrochemical complex after the Odisha government agreed to restore part of tax incentives, a top source said.

The state government has agreed to give Rs 700 crore per annum of interest-free loan for 15 years to make up for the withdrawn incentive of 11-year deferment on payment of sales tax on Paradip refinery products sold in the state.

“IOC wanted Rs 1,000 crore per annum of interest free loan but in the end settled for Rs 700 crore loan over a longer 15-year period,” said the source who was privy to the negotiations between the company and the state government.

After the deal reached with state government on Friday, IOC will go fullstream with expansion of Paradip refinery capacity by 5 million tons a year as well as set up a polypropylene plant and a monoethylene glycol production facility in 4-5 years, he said.

IOC will also withdraw a legal challenge moved at the Odisha High Court against the state government’s decision to withdraw signed commitment.

Odisha, which through a February 22 decision, withdrew the promised 11-year VAT or sales tax deferment, wanted the tax revenues to first come to its book and release the interest free loan. This was found acceptable to IOC.