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Tamil
Nadu - SIMA appeals CM to exempt cotton textiles from VAT
The predominantly cotton based textile industry in Tamil
Nadu has been facing a grave crisis for the last four months
due to abnormal drop in cotton and yarn prices, sudden glut
in the domestic and international market, huge accumulation
of yarn stock, closure of dyeing units in all textile
clusters including Tirupur due to pollution problem, acute
power shortage, etc. The spinning sector which accounts for
47.5% of the spinning capacity, 60% of yarn export of the
country, employing over 6 lakh people has incurred over
Rs.5,000 crores loss during the last four months.
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In order to minimize the losses, the spinning sector across the
country has cut the production by 35% from May 24, 2011 onwards and
recently hundreds of small and medium mills have stopped production
100%.
The industry has appealed to the Hon’ble Prime Minister to announce
a bail out package consisting of 2 years moratorium for repayment of
loans, restoration of DEPB and drawback with retrospective effect,
4.5% interest subvention for export packing credit, conversion of CC
limits into term loans, special working capital assistance, etc., to
avoid NPAs and make the industry to survive in the short run. Under
these circumstances, the increase in VAT rates announced by the
Government of Tamilnadu has become a last straw on the camel’s back.
In a press release issued, Mr J Thulasidharan, Chairman, The
Southern India Mills Association (SIMA), has said that the spinning
mills in Tamilnadu is already in a disadvantageous position due to
the absence of raw material base, incurring Rs.4 to Rs.5 per kg for
bringing the cotton from the States like Gujarat, selling over 60%
of the yarn in upcountry by spending equal amount for transport,
etc. He has stated that the new investment in modernization and
green field projects in Tamilnadu have already become dormant due to
power shortage and high logistics cost.
He has added that huge spinning capacity is being created in the
cotton growing States threatening the very survival of the textile
mills in Tamilnadu. Mr.Thulasidharan has also pointed out that the
increase in VAT rate on raw cotton from 4% to 5% would discourage
any cotton development in the State, as it is expensive for the
mills as the CST is only 2%. SIMA chief has further said that 1%
Market Committee fee on cotton and cotton waste is also an
additional burden to the textile mills in Tamilnadu.
Therefore, SIMA Chairman has appealed to the Hon’ble Chief Minister
of Tamil Nadu to exempt or provide optional route (as prevails in
the case of central excise) for raw cotton and cotton textiles right
from yarn to finished goods from VAT for a period of two years to
enable the industry to avoid further closures and regain its
competitiveness in the open market.
The Southern India Mills Association (SIMA).
Source : Fibre2fashion.com, India, dated 13/07/2011
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