Interviews
TEA wants reimbursement of VAT on diesel to LT industries
03 Nov '08
3 min read
We wish to submit that as a measure to provide relief to the HT industries , the Energy Department, Government of Tamilnadu issued GO MS No. 120 dated 20.10.2008 stating about the reimbursement of VAT on purchase of high cost diesel by HT industries for power generation through their captive power gensets during evening peak hours between 6.00 p.m. and 10.00 p.m, with effect from 11.10.2008
We wish to note that the above order has not included LT industries for reimbursement of VAT and it may be noted that more than 80% of the Service Connections given to knitwear sector in Tirupur region of Coimbatore Electricity Distribution Circle come under Low Tension category and they are deprived of getting the benefit extended to HT industries. Due to non extension of VAT reimbursement facility to LT industries, they have to pay additionally Rs. 8.74 for every litre of diesel purchased.
More importantly, the knitwear garment exporting units, LT consumers, are working out costing based on the prevailing rates of inputs, wages and the existing power tariff rate fixed by TNEB and many units are taking up the order well before six months / one year and any changes in the price of any of these factors in upward directions, will certainly have a direct impact on their competitiveness in the global market.
Now, our concern is that even with the market price of diesel at Rs. 37.50, the cost of power for producing one unit of electricity through Captive Generation is Rs. 11.50 against the TNEB grid power rate of Rs. 4.70 per unit and if the diesel is purchased from M/s. Essar Oil at Rs. 49.40 per litre, as per the TNEB's instructions, then the cost of power for producing one unit of electricity will increase upto Rs. 15.
Under the circumstances, it is not at all possible for the knitwear units to absorb such amount of increase in power cost and sustain in the global market. Moreover, the increase in power cost is happening at a time when the orders coming from US and EU are getting reduced due to ongoing financial crisis prevailing in these countries and requisition receiving from buyers for revision of garment prices downwards.
Considering the fact, we request the Hon'ble Minister to kindly extend the VAT reimbursement to LT units also immediately so that the knitwear garment exporting units will sustain in the global market.
We wish to note that the above order has not included LT industries for reimbursement of VAT and it may be noted that more than 80% of the Service Connections given to knitwear sector in Tirupur region of Coimbatore Electricity Distribution Circle come under Low Tension category and they are deprived of getting the benefit extended to HT industries. Due to non extension of VAT reimbursement facility to LT industries, they have to pay additionally Rs. 8.74 for every litre of diesel purchased.
More importantly, the knitwear garment exporting units, LT consumers, are working out costing based on the prevailing rates of inputs, wages and the existing power tariff rate fixed by TNEB and many units are taking up the order well before six months / one year and any changes in the price of any of these factors in upward directions, will certainly have a direct impact on their competitiveness in the global market.
Now, our concern is that even with the market price of diesel at Rs. 37.50, the cost of power for producing one unit of electricity through Captive Generation is Rs. 11.50 against the TNEB grid power rate of Rs. 4.70 per unit and if the diesel is purchased from M/s. Essar Oil at Rs. 49.40 per litre, as per the TNEB's instructions, then the cost of power for producing one unit of electricity will increase upto Rs. 15.
Under the circumstances, it is not at all possible for the knitwear units to absorb such amount of increase in power cost and sustain in the global market. Moreover, the increase in power cost is happening at a time when the orders coming from US and EU are getting reduced due to ongoing financial crisis prevailing in these countries and requisition receiving from buyers for revision of garment prices downwards.
Considering the fact, we request the Hon'ble Minister to kindly extend the VAT reimbursement to LT units also immediately so that the knitwear garment exporting units will sustain in the global market.
TIRUPUR EXPORTERS' ASSOCIATION
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