Taxes stifle textile growth in Punjab

A struggling industry demands roll-back of taxes to revive itself.

The textile cluster in Punjab is passing through a rough patch. The industry is grappling simultaneously with high taxes and the high minimum support price of cotton. The revision of entry tax on the raw material to 4 per cent last year has also increased the difficulties for the industry. The tax is around 2 per cent in neighbouring states. The spindles in Punjab consume about 5 million bales of cotton a year. The production in the state is about 2.5 million bales a year, so Punjab imports cotton from other states.

Hardyal Singh Cheema, joint managing director, Cheema Spintex, and chairman, regional committee, Northern India Textile Mills Association (NITMA), said textile units in Punjab were very heavily taxed in Punjab. “We pay for the rural development fund, infrastructure cess, entry tax and value-added tax that accounts to about 12.5 per cent. In addition to this, the Punjab Mandi Board has proposed a mandi tax on cotton procured from outside Punjab; this is not acceptable to the industry,” he added.

Another NITMA member, SK Duggal, said that after the introduction of TUF (Technology Upgradation Fund), the number of spindles more than doubled in Punjab. Despite this, Punjab has been laging behind Tirupur. He added that Ludhiana, a major export hub of hosiery and yarn, managed to earn export orders worth Rs 800 crore from Rs 600 crore in the last decade. In the same period, Tirupur excelled with a 10-fold increase in the figure raising it to Rs 2,000 crore from Rs 200 crore in the same period.

The revision in the minimum support price of cotton by 40 per cent this year in a single decision was accepted by the industry with a pinch of salt.

Most of the industrialists consider the government as pro-agriculture and anti-industry. There has been a feeling among industrialists that the subsidies and freebies offered to agriculture in form of free power and agri-debt waiver makes the industry pay more than their fair share to the state revenue.

The industry in Punjab laments over the high cost of power (Rs 4.50 per unit) and poor quality (fluctuations in power supply between 250 Mw -50 Mw) marring their output which makes them uncompetitive. Any fluctuation in volatge or faulty power is harmful for the machines, they said.

The exodus of industry from Punjab to the neighbouring state of Himachal in the past few years due to tax holidays put the state at a disadvantage.

The small and medium units are already hit due to global and financial meltdown as the volume of business has been affected. Their representatives contend the state government should roll-back taxes to save the industry from meeting an untimely death.