Punjab yarn spinners at cross roads: Vyas

Large scale closures of textile industry seems imminent in present dynamics
Ludhiana, August 6, 2014: A meeting of Punjab Spinners Association took place in a local hotel here on Wednesday. Speaking on the occasion, the association’s president M M Vyas said, they have been requesting Punjab Government to reduce the rate of VAT from 6% to 2% or ban the import of yarn into the state of Punjab through exemption certificate for not paying the advance tax.
He added in fact, Punjab’s own industry which has made huge investments in Punjab, is not able to compete with yarn spinners from outside Punjab as Punjab spinners have to pay VAT @ 6% on yarn where as spinners from other states pay either 2 % or NIL CST. Some states like Delhi, West Bengal and Uttar Pradesh have no VAT or CST on cotton yarn.
Adding, he said, the tax disadvantage to the yarn spinners located in Punjab has further compounded the problems of spinners in Punjab as the Power tariffs, wages & logistics costs in Punjab are already amongst the highest in the country.
Vyas said due to import from other states the yarn spinning industry in the state is not able to utilise its full capacity. Idle capacity leads to huge interest burden on mills and non recovery of operation cost. Needless to say, idle capacities are also leading to a loss of employment for the youth of Punjab. Unemployment is a curse that can eventually lead to social evils like anti social activities, drug addiction and multiple crimes.
Further, he said this is pertinent to note that the states like Rajasthan, Maharashtra, Gujarat and Madhya Pradesh are promoting textile industry in their states by giving tax exemptions and interest subsidy which is becoming a big threat and pain for Punjab textile industry. Punjab, on the other hand is losing its niche / upper edge in overall textile market due to non intervention by the state authorities to make the tax regime / incentives competitive to other states. Due to these incentives leading entrepreneurs of Punjab have made investments to the tune of Rupees 15,000 crores in other states which otherwise could have been made in Punjab itself
Vyas said the situation can lead to a major crisis if not addressed with a sense of urgency. Current situation is also causing direct loss to Government of Punjab as it is losing substantial revenue of about Rs. 500 crores due to import of tax free yarn from other states on account of issue of exemption certificate. The Punjab spinners are also being affected more adversely due to this.
“Association is of the view that lower utilisation of capacity by yarn spinners of Punjab and investments outside the state is something very alarming and needs to be handled without any further loss of time”, he said.
He added the current dynamics are also leading to export of Punjab cotton to other states which in fact is the “Pride of Punjab”. It is akin to throwing away your valuable competitive advantage to the benefits of other states. Therefore, association feels that it will be much better on the part of Punjab Government to ensure usage of this cotton within the state of Punjab to continue employment generation.
He said the state government is giving a subsidy of Rupees 7600 crores to the farmers of Punjab in term of free power which is recovered from industry by levying 13% electricity duty and cross subsidy surcharge. Present situation, which is leading to closure of spinning mills, will create serious difficulties for farmers to sell their produce in the state. It is important from the point of view of the welfare of the farmers also that spinning industry must be supported with right policies.
The Punjab yarn spinners need to be given level playing field by reducing VAT to 2% or imposing a ban on the imports through exemption certificate for not paying the advance tax or through some other suitable options which the government deems appropriate. If the Government of Punjab can’t consider reduction in VAT it must ensure that the yarn from the other states enter the state of Punjab by paying equal entry tax in whatever form Government thinks fit.
Vyas said as state government is already aware of the plight of steel industry which already has put shutter down and if nothing is done the same is going to happen for textile industry also. If immediate corrective measures are not taken to safeguard the industry, our loving state will be left without any industry.