At a time when industries’ clamour for sops has become perpetual, edible oil refiners want Andhra Pradesh and Telangana governments to bring their units in the negative list for incentives.
To put it differently, they want the value-added tax (VAT) refund, which is five per cent for the small scale units and comparatively less for medium and large refineries to be withdrawn. Apart from the tax incentive, SSI units are also eligible for interest subsidy.
The demand, which Krishnapatnam Edible Oil Refiner’s Association Secretary-General Pradeep Chowdhry says, has the support of all refiners, big and small, is to save the units sagging under excess capacity. Caught in the whirlpool are also banks.
Estimating the NPAs at Rs.2,000 crore, in the erstwhile AP, Mr. Chowdhry explained that edible oil refiners import crude palm oil, refine and package. “It is a commodity business where product differentiation is low. Profit margins are 1-2 per cent.”
With an eye on attracting investments and creating jobs, the erstwhile Andhra Pradesh government offered new refineries VAT refunds, something the Telangana government, he added, has also announced. This led to many companies entering the field and creating capacities far in excess of the demand. The consumption of edible oil in the two Telugu speaking States is around 1-1.2 lakh tonnes a month.
In Krishnapatnam alone, the total capacity of seven large units is 1.75 lakh tonnes per month. Kakinada is another hub.
Governments initiating measures to attract investments are fine, but that should not be at the cost of old units. Continuation of the VAT refund policy, Mr. Chowdhry, who is managing director of Gemini Edibles & Fats India Pvt. Ltd, said would only lead to loss of revenue for government.
