G. Gurumurthy

Coimbatore , June 21

ROLLER flour millers in Tamil Nadu say that the State's wheat products market has become vulnerable to dumping from millers from neighbouring Karnataka and those from northern States due to anomalous railway freight and skewed sales taxation regime in the absence of value added tax (VAT) system in Tamil Nadu.

The reclassification in the freight for food grains by the railways has rendered movement of wheat from the northern belt by the rail-dependent flour mills in Tamil Nadu costlier by 33 per cent and made their operation increasingly unviable, said Mr V.K. Gupta, President of the Tamilnadu Roller Flour Mills Association

The reclassification effected by the railways in March has led to the shifting of wheat to a higher tariff bracket, but at the same time to the retention of `wheat flour' under the old classification (class-90). This has enabled the movement of finished wheat products by the millers situated closer to the wheat production tracts in northern centres at competitive rates over what Tamil Nadu millers could offer even within the State.

While a miller in Delhi could get wheat, his prime raw material, for making wheat products such as Atta, maida or sooji at Rs 710/720 per quintal, the landed cost of wheat for the Tamil Nadu miller including the freight would be in the Rs 920-940 band, said Mr Gupta.

The freight advantage for the northern millers could be seen in the prevailing market trend where maida ground by the Delhi miller is being sold in Chennai at Rs 920/940 a bag of 90 kg whereas the cost price of the same product produced by the Tamil Nadu miller has to be Rs 1,020/1,040.

But what has turned bitter of late for Tamil Nadu flour millers is the flooding of market by the Karnataka-based four millers who have been dumping their wheat products since April after Karnataka moved into the VAT regime. Unlike the Tamil Nadu Government, which has chosen to skip introducing VAT and thus retained the sales tax on wheat products at 4 per cent, Karnataka has brought wheat and wheat products at `nil' rate under its VAT system enabling the millers in that State unleash a price war on their counterparts in Tamil Nadu.

Besides the 2 per cent and 4 per cent on wheat and wheat products by Tamil Nadu, the millers are also subjected to turnover tax and 1 per cent resale tax which together bring the additional cost at Rs 45 or so per bag and make them uncompetitive.

Increasingly being edged out in the market place, the flour millers, who have an installed grinding capacity of 1.50 lakh tonnes, are seeing their volume of operation falling drastically to around 45000 tonnes. "As against the total wheat product market space of 90,00 tonnes per month, today more than 50 per cent of this is met from imports from other States."To rescue the State flour milling industry, Mr Gupta called upon the Railway Ministry to restore the original freight classification for the wheat. He also wanted the Tamil Nadu Government to introduce VAT to provide level playing field and until this is done, exempt the wheat products from the 4 per cent ST.

To counter the dumping of wheat products from other States, he wanted the State Government to effectively levy 12 per cent entry tax which should be imposed at the entry level itself instead of its collection at a later stage.

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