Sales tax exemption demanded for resuming Dunlop production
November, 24th 2008
Claiming he had no intention of closing down tyre manufacturing firm Dunlop, chairman Pawan Kumar Ruia Sunday asked for sales tax exemption from the West Bengal government and an agreement with the workers for increasing productivity before resuming operations at the Sahaganj factory.
A week after suspending production at the factory in Hooghly district neighbouring Kolkata, Ruia said he was negotiating with the banks for a working capital loan of Rs.700 million in the first phase.
"Our total shortfall is Rs.2 billion. But we are expecting to tie up soon with a bank for an initial amount of Rs.700 million," Ruia said at a media conference here.
Ruia, who is scheduled to meet state labour minister Mrinal Banerjee Monday, demanded a sales tax exemption for 12 years as part of the ailing company's long-term revival plan.
Seeking to revisit the production norms with workers, Ruia said the present rate of churning out 15 tyres per machine each day needed to be upscaled to 20-24 tyres.
Ruia said the sales tax exemption was part of the incentive package his company was supposed to get from the government. "But we are still awaiting the relief."
Despite requests that the government source all its tyre requirements from the company, Ruia said this hasn't happened. "We have not got that, though we are supplying to West Bengal State Transport Corporation," he said.
The chairman of the Rs.15-billion Ruia Group said he has already injected more than Rs.5 billion in Dunlop and termed the recent development as a 'temporary setback' caused by the global recession.
"As the banks lost liquidity and risk appetite, there was a delay in sanctioning the working capital loan for us. But due to the government's actions, the liquidity with banks seems to be improving," Ruia said.
"Let me tell everybody that after three years of hard labour, I don' foresee any permanent closure. Nor is there any plan to use the land for real estate business. No question of going for a special economic zone (SEZ) also.
"A temporary setback cannot be termed a permanent closure. Let people have some patience, and production will start soon," said the Kolkata-based businessman, who bought over Dunlop India from Manohar Rajaram Chhabria's family in late 2005.
Ruia, however, could not give the exact date for restarting production. But he gave a broad time frame of 15 days to two-three months.
He said with a severe drop in primary demand, estimated to be in the region of 40 percent, the company has cut its expenses and even the managerial staff are working on a reduced salary.
"There were two options before us - suspension of operation without paying wages, or paying a monthly subsistence allowance to the workers. We have gone for the second option," he said.
With the 1,202 workers of the Sahaganj factory being paid a monthly subsistence allowance of Rs.2,000, the salary bill per month would come down to Rs 2-2.4 million from Rs.7-8 million.