The Hindu Business Line : CENVAT main issue in TN powerloom belt

IF there is one word that constantly echoes through the noisy election campaign of every political party in Salem, Coimbatore, Tiruchengode, Rasipuram, Gobichettipalayam and Pollachi Lok Sabha constituencies in Tamil Nadu, it is CENVAT.

Wherever one travels in these constituencies, he finds that this Centrally Value Added Tax is a major issue. For it is an issue that is directly connected with an estimated 4.5 lakh powerlooms in operation in the State.

Of all these issues, what takes the centre stage is CENVAT. Much of the 4.5 lakh powerlooms in Tamil Nadu are located around Salem, Rasipuram, Tiruppur, Erode, Pallipalayam and Tiruchengode towns. Every important political party including the DMK, the AIADMK, the Congress, the MDMK, the PMK, the CPI (M) and the CPI have declared that they would get CENVAT scrapped if their candidates get elected.

The powerloom owners - small and big - are angry with the NDA Government at the Centre, especially the BJP, which brought in CENVAT about a year and a half ago. The DMK President and former Chief Minister, Mr M. Karunanidhi, leading the Democratic Progressive Alliance (DPA) comprising his party, the Congress, the MDMK, the PMK, the CPI (M), the CPI and the IUML has promised that he would work to get CENVAT removed (if a Congress-led government comes to power at the Centre).

The AIADMK leaders want to know why the DMK, the PMK and the MDMK Ministers went along when they were part of the NDA Government and the Union Finance Minister, Mr Jaswant Singh, brought in CENVAT. "CENVAT has slashed the jugular of the powerloom sector," says Mr K. Subbarayan, the CPI candidate standing from Coimbatore.

The MDMK in its poll manifesto says that it would impress on the Centre to remove CENVAT, reduce the surcharge on hank-yarn and control the export of cotton. The AIADMK in its manifesto says that it "will urge the Government at the Centre to revoke the taxes" such as CENVAT, excise duty and additional excise duty on yarn and so on.

The question that small powerloom weavers who own three to five looms raise is that why should they be punished with this `cumbsersome', `chain-system of taxation' when it is the spinning-mill owners, they (powerloom owners) allege, who evade paying the excise duty on the yarn they manufacture.

The powerloom owners charge that CENVAT has pushed up the price of cloth they manufacture and so purchasers are not prepared to buy this cloth at enhanced price. Besides, there is competition from China-made fabrics, which has come into the market.

"Spinning mill owners have to pay eight per cent tax (CENVAT) on the yarn they sell (to powerloom owners). If this is monitored, there is no need to harass the powerloom owners," said Mr Jagadeesan , husband of Ms Subbulakshmi Jagadeesan, contesting on the DMK ticket from Tiruchengode constituency.

In the 2003-04 Budget, the Union Government imposed ten per cent CENVAT system (including the eight per cent levied on the yarn produced by the spinning mills) on all kinds of powerloom woven cotton fabrics and five per cent excise duty on various processes involved in making the fabrics. These processes include bleaching, dyeing, calendaring, centering and processing.

What is agitating the powerloom weavers, according to Mr M. Annadurai, Secretary, Erode Powerloom Owners' Association, is that they had to pay tax at every stage of these processes including the eight per cent to spinning mill owners.

"This is a chain system and it is lined with taxes from yarn to the garment. It is cumbersome," he said.

Powerloom owners had to maintain records at every stage, and it would not be possible for owners with just three or four looms to do so. "Powerloom owners are not evading tax. Why are you punishing the innocent, small weavers?" Mr Annadurai asked.

He said CENVAT had led to an increase in the cost of production of cloth because tax had to be paid at every stage. So there was a loss of market.

More Stories on : Taxation | Textiles | Politics | Tamil Nadu

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