Date:14/10/2004 URL: http://www.thehindubusinessline.com/2004/10/14/stories/2004101400661100.htm

Back Flour mills in South facing crisis

M.R. Subramani

Capacity utilisation of each unit in Tamil Nadu has declined to below 50 per cent.

Chennai , Oct. 13

FLOUR mills in South India, especially Tamil Nadu, are facing a crisis on uncertain supply from Food Corporation of India (FCI), rising freight charges and dumping of wheat products by units in North India.

"Though wheat is made available from FCI, priority is for the public distribution system. We are totally ill-at-ease as far as wheat availability is concerned," said Mr Virender Kumar Gupta, President, Tamil Nadu Roller Flour Mills Association.

"We are primarily dependent on supplies from FCI since the option of buying it in open market and transporting it here is economically unviable," he said. If the mills procure from the open market in the North, they have to spend a minimum of Rs 240-250 a quintal on transportation.

"Rising fuel prices are making things very difficult. No doubt, quality of wheat is assured but of what use is it when it is not feasible?" Mr Gupta wondered.

Under the open market sale scheme, the mills are provided wheat at Rs 860-870 a quintal, a little lower than the prevailing market price of Rs 900-920. Thus, it makes them all the more dependent on FCI for milling.

Until 1998, the mills had the option of import wheat. "Then, it was beneficial to import quality wheat and the landed price was lower than that of domestic wheat," said Mr Gupta.

But with imports hurting domestic wheat prices, the Government raised the customs duty to 50 per cent. "Imports have become totally unviable now," said Mr M.V. Balasubramaniam, an executive member of the association.

"The Vajpayee Government permitted wheat exports by offering stocks from FCI at Rs 4,500 a tonne. Even for export of wheat products, wheat was given at a higher price. Despite the fact that we were exporting a value-added product, we were denied level-playing field," he said.

"Apart from these, the other stumbling block is dumping of wheat products by mills from Delhi and Uttar Pradesh. These mills bill their consignments to Pondicherry to evade sales tax and entry tax and sell the products in Tamil Nadu," Mr Gupta said.

While wheat products such as sooji, maida and atta milled in Tamil Nadu are quoted between Rs 950 and Rs 1,080 per 90-kg bag, the products from the North are at least Rs 100 lower, according to the flour millers.

"The amount for transportation of wheat products is the same as transporting wheat. Mills in the North, particularly Delhi and Uttar Pradesh, don't have to pay Central sales tax and that adds up to their advantage," Mr Balasubramaniam said.

In view of all these problems, at least eight of the 50-odd flour mills in Tamil Nadu have closed.

"Besides, the capacity utilisation of each mill has declined to less than 50 per cent," Mr Balasubramaniam said. The cumulative monthly capacity of all the mills in Tamil Nadu is 1,40,000 tonnes. Till 1998, when imports began slowing down, the capacity utilisation was 75,000-80,000 tonnes.

"Now, it is just about 50,000 tonnes," Mr Gupta said.

In view of the `grave' situation, the mills have urged the Centre to provide a level-playing field for them.

"One, the Government can allow imports at zero duty. Two, it can make available raw materials such as wheat adequately at an affordable price. Three, the Centre can bring in an uniform tax policy so that mills in States where there are higher incidences of taxes do not suffer," Mr Gupta said.