The Hindu Business Line : Cenvat removal puts paper cone units in a fix

PAPER cones and tubes manufacturers are in a fix over the removal of Cenvat for the textile sector. While the textile sector hails the removal of Cenvat, paper cones and tubes manufacturers claim that the move has had an adverse effect particularly on the small scale manufacturers.

According to Mr D. Rajendran, Secretary of the South India Paper Cones and Tubes Manufacturers Association, most manufacturers of paper cones had opted for Cenvat, as their raw materials, namely paper and paper boards attract 8 per cent excise duty and textile mills (which were under Cenvat till recently) had been claiming Modvat credit, and they, in turn, were charging 10 per cent Cenvat.

"The Modvat chain was smooth. But after the removal of Cenvat for the textile industries in the recent Budget, almost all the mills have opted for zero excise and they in turn are insisting us to supply materials without excise duty," he said.

This would not be possible as most paper cone manufacturers had opted for excise duty at the beginning of the financial year and could not retract from it.

While the Finance Minister provided a level playing field for the different segments such as handloom, powerloom, cotton textile mills etc., of the textile industry, "we will be justified in asking for the extension of the benefit to our sector as well," Mr Rajendran said.

Replying to a query, Mr Rajendran said that the association had been trying to find some way of coming out of this fix.

"We discussed various options, even to the extent of shifting or starting a new unit elsewhere and registering afresh. But bankers are refusing to extend financial assistance without settling the existing accommodation. The movement of our material to the textile sector has come to a near halt. Only those units that had earlier opted out of the Cenvat chain have survived the blow," he said.

According to him, there were over 125 paper cones and tubes manufacturers in Tamil Nadu alone, of which about 25 units were operating in the unorganised sector.

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