Date:05/11/2008 URL: http://www.thehindu.com/2008/11/05/stories/2008110554630500.htm

Tamil Nadu

TEA seeks reimbursement of VAT on diesel purchases to LT units

Staff Reporter

Tirupur: The Tirupur Exporters Association (TEA) has urged the State Government to extend the reimbursement of Value Added Tax (VAT) on diesel purchases to Low Tension (LT) industrial units.

‘Peak hours’

In an order issued by the State Energy Department recently, it was stated that VAT levied on purchase of diesel by High Tension (HT) units for electricity generation through captive power generators during the evening ‘peak hours’ (between 6 p.m. and 10 p.m.) would be reimbursed with retrospective effect from October 11.

A Sakthivel, president of TEA, said that it would be desirable to stretch out the sop to LT units as well, considering the operational difficulties faced by the sector owing to overall power crisis experienced in the state.

He pointed out that 80 per cent of the service connections given to the knitwear sector in Tirupur region of Coimbatore Electricity Distribution Circle falls under LT category.

“Due to non extension of VAT reimbursement facility to LT industries, we have to pay an additional sum of Rs 8.74 for every litre of diesel purchased,” he said.

This extra amount had put enormous financial burden on LT garment units since the cost of apparels were worked out based on the prevailing rates of inputs, wages and power tariff.

Mr Sakthivel said that the knitwear exporters here had brought to the notice of State Government the burden caused by the rise in power production through captive generation methodology owing to high cost of diesel.

“With the market price of diesel at Rs 37.50 per litre, the cost of producing a unit of power is Rs 11.50 against the TNEB grid power rate of Rs 4.70 per unit. If the diesel is purchased from Essar Oil at Rs 49.40 per litre, the production cost will touch Rs 15 per unit”.

He said that escalation in captive power generation cost added to the woes of the knitwear exporters who were already facing a crunch in the orders coming from the Western markets owing to global economic turmoil.

“In this scenario, it is vital that the Government reimburse the VAT on diesel purchased for captive power generation to save the LT units from closing down,” he said.