The Hindu Business Line : Tirupur exporters plea to extend VAT relief to low tension units

The Tirupur Exporters’ Association (TEA) has appealed to the Government to extend reimbursement of VAT on diesel purchases to low tension (LT) industries.

Citing a Government order issued last month on reimbursement of VAT on purchase of high-cost diesel by the HT industries, the exporters’ association, while appealing that such concession be extended to the LT industries as well, pointed out that more than 80 per cent of the service connections to the knitwear sector in Tirupur region were under the LT category. ‘Due to non extension of VAT reimbursement facility to LT industries, we have to pay an additional sum of Rs 8.74 for every litre of diesel purchased,’ the TEA President, Mr A. Sakthivel, said.

Production costs

The garment exporting units work out the production cost based on the prevailing rates of inputs, wages and power tariff fixed by the Tamil Nadu Electricity Board. ‘The orders are taken well in advance – six months to a year. So any significant increase in the cost of inputs has a direct adverse impact on our profitability, global competitiveness,’ Mr Sakthivel said.

Captive generation

The industry’s concern at this juncture is not limited to the high cost of diesel alone, but cost of captive generation. ‘With the market price of diesel at Rs 37.50/litre, the cost of producing one unit of power (through captive generation) is Rs 11.50 against the TNEB grid power rate of Rs 4.70/unit. If the same is purchased from Essar Oil at Rs 49.40/litre, the captive power generation cost would touch Rs 15/unit. It would be impossible for us to absorb this cost, particularly when orders from the US and European Union have started to drop due to the ongoing financial turmoil there. The buyers are asking that the rate be revised downwards. We are already working on wafer-thin margins and such spiraling increase in the input cost will force us to down shutters,’ he said.

More Stories on : Knitwear & Hosiery | Taxation | Tamil Nadu

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