Tirupur awaits Cenvat waiver

Most powerlooms in the Tirupur-Avinashi-Somanur-Palladam belt in Tamil Nadu, which stopped production since March 12, 2003, to protest against the 10 per cent central value-added tax imposed in the Budget for 2003-04, are hoping to resume work soon.

Small powerloom operators would be given a special waiver, industry sources said. Industry representatives lobbying against Cenvat for the past week in Delhi have convinced the finance ministry against imposing the duty on small looms.

M S Mathivanan, chairman of the Confederation of Indian Weaving Industry, said: "Chief ministers of the states that have over 80 per cent of the total powerlooms in the country have supported our request.

Revenue Secretary C S Rao has given tentative consent to exempt small powerloom operators from Cenvat, though the definition of a 'small powerloom' is yet to be decided."

The industry expects powerlooms with an annual turnover of less than Rs 25 lakh (Rs 2.5 million) to be categorised as small.

However, manufacturers of finished products like saris, bedsheets and towels, with an annual turnover of less than Rs 1 crore (Rs 10 million), also hope to be included. The prospect of favourable news from New Delhi could prompt most powerloom operators in the country to resume work.

The powerloom segment was the only one in the chain of yarn-to-apparel manufacture left out of the excise duty net, M Dwivedi, commissioner of Customs and central excise (Coimbatore and Salem), said.

"We are trying to bring the entire chain of apparel manufacture under central excise. Like any other segment, credit will be available at all levels if proper papers are produced," Dwivedi pointed out.

Powerloom owners are less opposed to the idea of a Cenvat than its immediate introduction. R Ponnusamy, president of the Somanur Powerloom Cloth Manufactures' Association, said: "We appreciate the idea of Cenvat. However, our demand is it should be introduced in stages to give small loom owners enough time to understand how the system works."

The majority of powerlooms in Tamil Nadu have been shut since March 12.

The output in the Somanur-Palladam-Tirupur-Avinashi belt is estimated to be Rs 9 crore (Rs 90 million) a day, which means an excise duty loss of Rs 1 crore for every day these looms did not operate.

A strong anti-Cenvat group, which includes the BJP MP from Coimbatore, C P Radhakrishnan, is lobbying with Prime Minister Atal Bihari Vajpayee and the finance ministry to postpone the imposition of Cenvat on powerlooms by a year.

"Powerloom owners were supposed to register before March 31, 2003. However, considering most of these are small looms in the unorganised sector, the deadline was extended to April 7 and then again to April 15. This was done to help small operators understand the process," Dwivedi said.

If the finance ministry decided against withdrawing Cenvat on powerlooms, the excise department would be forced to adopt extreme measures like seizing goods and closing the mills, Dwivedi said.

As the stand-off continues, nearly 1.5 million workers wait for the final verdict.