The Hindu : Weavers hard hit by Cenvat

Online edition of India's National Newspaper
Saturday, Apr 12, 2003

Southern States

Southern States - Tamil Nadu

Weavers hard hit by Cenvat

By R. Gopalakrishnan

CHENNAI April 11. "What we do is just like fixing a motor on to a cycle and riding it. But taxation on powerlooms has been conceived as if powerlooms represent the ultimate in technology and manufacture. We, master weavers, as also those ordinary people whose manual work we coordinate to produce cloth with powerlooms at the end of the production chain, are only one step further from our traditional occupation, viz, handloom weaving", explains the president of the Vellore Powerloom Producers Association, V. V. Dheenadayalan, conveying the strong resentment over the imposition of Central excise (Cenvat) duty on powerloom fabrics in the current year's Union budget, as expressed in the ongoing strike of weavers.

With the help of a brochure, Mr. Dheenadayalan pointed out how the thousands of weavers in Tamil Nadu add "value", representing nothing more than wages and power cost, to yarn that has undergone processes entirely manual and carried out by ordinary people, like farm labourers, in their homes or makeshift worksheds. Operations like winding of "chitta" yarn, dyeing, starching and drying, reeling etc, are done by common people before yarn is transformed into cloth by power-operated looms.

"The strike by powerlooms has led to starvation among all those poor people involved in the production chain. We (weavers) are thinking of arranging some relief for these families, but this is clearly not a sustainable option".

The trade had already been weakened by the imposition of a hike in power tariff in the State more than a year ago. What little viability was left had been undermined by the present imposition of Cenvat on powerloom fabric, he said, talking to The Hindu.

Asked why weavers should resist imposition of VAT which would entitle them to credit against excise duty paid on inputs (yarn, dyes, starch) and at the same time help the exchequer raise revenue, Mr. Dheenadayalan wondered what documentation acceptable to officialdom can be obtained from the poor and semi-literate people who carry out various activities in the production chain.

The weavers or (in case they do only job work) their principals would risk being on the wrong side of the law and landing in jail, while the cost of production plus minimal margin inclusive of Cenvat would price their cloth out of the market, he said. He pointed out that though returns could be filed on a quarterly basis, the duty would have to be paid monthly, while trade credit extended by weavers to buyers covered a longer period.

"The imposition of Cenvat is aimed at making up revenue loss for which we are not responsible.

It is the revenue loss from evasions and malpractices in the organised sector which is sought to be compensated by bringing powerlooms into the tax net", he said.

Regretting that policy-makers had failed to show the same sensitivity to the needs of the highly employment-oriented powerloom sector as they had shown to agriculture, Mr. Dheenadayalan said competition from imported cloth, especially from China, would wipe out cloth production in the unorganised sector, unless unrealistic policies such as taxing powerloom cloth and hank yarn were withdrawn.

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