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Bengal steel firms face end to tax incentives

Calcutta, April 15: The iron and steel industry, which has witnessed a quantum growth in Bengal, feels threatened by finance minister Asim Dasgupta’s announcement that the incentive scheme could be withdrawn after the introduction of VAT.

The iron and steel industry has already made representations to the chairman of West Bengal Industrial Development Corporation to sort out the issue.

The state government had sanctioned the incentive scheme for large and medium scale industries in 1999, overriding the West Bengal Incentive scheme launched in 1993.

It was at the initiative of Dasgupta that all states framed a national policy to withdraw the incentives on sales tax from January 1, 2000. The Bengal government decided not to accord approval to any project under 1999 incentive scheme beyond December 31, 1999 and implemented within the next two years.

Following this announcement, a large chunk of investment went into the iron and steel sector. According to the data supplied by the state industry department between 1991 and 2001, a total investment of Rs 6,527 crore has been made in this sector, of which modernisation at Durgapur Steel Plant alone has contributed substantially.

Between January and December 2002, 16 units with a total project cost of Rs 241 crore were commissioned in the state; 77 other projects worth almost Rs 2000 crore are under different stages of implementation.

The projects approved under the incentive scheme 1999 are eligible for sales incentives in the form of exemption, deferment and remission of sales tax.

“With the introduction of VAT, the units will have to pay sales tax at the rate of 4 per cent,” said a iron and steel industry official.

“The cash flow will be affected and units will not be able to pay the interest and installments to financial institutions leading to creation of huge non-performing assets, sickness and closures of units as remission, exemption, deferment of tax on the value addition will be negligible. It will send out a wrong signal to ongoing investments and will harm workers employed directly or indirectly,” they added.

This will affect the smaller units as the large industrial units will start procuring their steel directly from the plants by paying only 2 per cent central sales tax.

On the steel industry’s plight once the incentive scheme is removed, WBIDC managing director Gopal Krishna said: “The government is working on a scheme. A clear picture will emerge after a fortnight.”

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