Tamil Nadu matchbox industry demands 8 percent duty cut

March 7th, 2008 - 8:28 pm ICT by admin  

Chennai, March 7 (IANS) Around 200 matchbox making units in Tamil Nadu will down their shutters March 10 demanding an 8 percent reduction of Cenvat duty. Speaking to reporters here Friday, S. Sriram Ashok, president of All India Chamber of Match Industries (AICMI), said the government should reduce the Cenvat to save the industry.

According to him, the cost of raw materials - potassium chloride, red sulphur, paper, board and wax - jumped manifold in the recent past but not the retail price of matchboxes.

“Sulphur price has gone up from Rs.17 per kg to Rs.32 per kg in a matter of four months. Potassium Chloride is now at Rs.40 per kg, up from Rs.28 a year ago,” he said.

S. Ashok, AICMI vice-president, said duties on cars have been drastically cut in the union budget but not on matchboxes used by common man.

“For the past several years, the industry has not been able to increase the matchbox prices. It remains fixed at fifty paise owing to unhealthy and illegal competition,” he added.

Large match industry manufacturers paid Cenvat at 12 percent while hand-made units were totally tax-exempt, said S. Sriram Ashok.

This leads to huge tax evasion by large as well as small units.

The process of making matchboxes includes splint arranging, splint dipping, outer and inner box manufacturing, dipped splint filling and final packing.

“As getting labour is becoming difficult, manufacturers are automating splint arranging, dipping and dipped splint arranging process,” S. Ashok said.

“Out of the 90 million bundles (each bundle consists of 600 matchboxes) per year, less than 18 million bundles are made by small units that are tax-exempt,” the vice-president said.

The government should actually get Rs.1.75 billion ($43.6 million) as Cenvat duty from the production of 72 million bundles. However, “The actual collection is just Rs.550 million showing a massive tax violation,” he said.

According to S.S.D. Krishna Moorthy, managing director of Liberty Match Co Pvt Ltd, it is difficult to catch the violators as they are widely spread.

The huge tax evasion enables the small players to distort the market with low prices.

According to industry players, the government can bring down the Cenvat to four percent so that the cost difference between the organised and law-abiding units and the small units could be lowered.

The other option is to abolish the Cenvat and levy one percent cess across the industry.

“Genuine small players can be identified by government agencies and appropriate refund/subsidy could be made to them,” S. Ashok said.

He added that Indian exporters were facing stiff competition from Pakistan in Africa and South America.

“Our price is around $9.50 per 1,000 boxes whereas Pakistan offers the same for $6.50,” he said.

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