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Wednesday, Nov 26, 2003

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Excise anomaly hits organised sector fan cos

Badal Sanyal

Kolkata , Nov. 25

ELECTRIC fan manufacturers in the organised sector are finding it difficult to maintain their market share because of the difference in price of fans produced and supplied by manufacturers in the unorganised sector. This situation has developed because an anomaly in the existing excise duty rates, according to the Indian Fan Manufacturers Association (IFMA).

The association feels that fan makers in the small and tiny sectors, accounting for about 60 per cent of the total number of fans produced in the country, have a tendency to circumvent excise and other taxes and sell fans at much lower prices offering stiff "unethical" competition to manufacturers in the organised sector.

It is alleged that the basic reason of their offering at half the price is not because of their lower overhead or unique technology, but basically due to their capability of "evading Excise Duty and Sales Tax." As a result, the annual production of organised fan manufacturers had been static at 8.5 million pieces as against the annual production of about 13 million fans in the unorganised sector, although the organised sector's production was about 20 million pieces about 10 years ago.

IFMA has pleaded the idea of abolishing excise duty in the long-term interest of the domestic fan industry. It is argued that the total excise collection on fans would be about Rs 90 crore, out of which Rs 40 crore is adjusted towards Modvat. Therefore, the revenue loss will be about Rs 50 crore if the excise duty on fans is abolished.

However, the association feels that the revenue loss could be compensated by way of saving colossal waste of energy. About 130 lakh fans manufactured by the tiny sector, which are mostly sub-standard in quality, consume at least 20 Watts more than those in the organised sector. To meet such extra power requirement, a thermal power plant of 433 MW (considering 60 per cent plant load factor) needs to be added every year at an investment of about Rs 2,600 crore. Thus the revenue loss of Rs 50 crore in abolishing excise duty is negligible to the colossal waste of energy and huge expenditure of the government, it considers.

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