Financial Daily from THE HINDU group of publications
Wednesday, Jul 17, 2002
Agri-Biz & Commodities
Oilseeds & Edible Oil
TN: New edible oil levies spur smuggling
CHENNAI, July 16
THE edible oil trade in Tamil Nadu has been severely hit by the taxes levied by the State Government and finds itself at a competitive disadvantage when compared to traders in the neighbouring States.
With prices firming up, the local trade found itself unable to take advantage of the increasing prices, said market sources.
When contacted by Business Line, traders said that with edible oils being exempt from taxes in Andhra Pradesh and Karnataka, lorry loads of the commodity were clandestinely moving into Tamil Nadu. There had been a free flow particularly from Andhra Pradesh into Krishnagiri and Vellore, and from Karnataka into Coimbatore and Dharmapuri districts, they said.
With the Centre's decision last year to encourage local refiners and with the lower import duty of 65 per cent on crude palmolein as compared to 95 per cent on refined oil, there has been a significant increase in refining capacities in Andhra Pradesh and Tamil Nadu.
However, the local tax structure had been favourable in the neighbouring States (i.e., AP and Karnataka) with exemptions granted to the new mills. The refiners here had to pay a host of levies, they said.
According to trade sources, the volume of local trade in edible oils has been hit primarily due to the sales tax, tax on subsequent sales and the turnover tax levied by the Tamil Nadu Government.
With over 2000-3000 tonnes per day of refining capacity established by major players, the monthly output is about 12 lakh tonnes against an estimated consumption of about 7.2 lakh tonnes. Under adverse tax structure, the local trade could not hope to cater to the local demand, and did not stand a chance of marketing the excess supply in other markets, they said.
The refiners in neighbouring States can sell edible oils at least Rs 2 per kg cheaper than the local traders, they said.
In Tamil Nadu, the turnover tax ranges up to 3 per cent for a turnover of more than Rs 300 crore and about 2.5 per cent for a turnover between Rs 100 crore and Rs 300 crore. With one lorry load costing an average of Rs 3.5 lakh, and the nature of business being essentially high volume, most of the large players are hit by the high turnover tax.
This is compounded by a sales tax of four per cent, an infrastructure surcharge of five per cent and a resale tax of one per cent, which have come into effect from July 1. The local trade has drastically cut down on the volume of operations, according to market sources.
With the local trade staying away, the State Government was not likely to realise higher revenues as envisaged, traders pointed out. The current structure only encouraged tax evasion, harassment by the Government officials and paved the way for diversion of trade to those outside the State, they said.
Meanwhile, following dry weather conditions in the domestic market, the prices are on the ascent, spurred by the increase in the price of Malaysian RBD palmolein.
But the local trade had not been able to take full advantage with over 250-500 tonnes of refined edible oil, particularly palmolein coming in daily from Andhra Pradesh, they said.
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