Kerala govt yet to decide on reducing tax burden on FACT

James Paul
10 September 2003

Kochi: The Kerala state government is yet to decide on reducing the tax burden on the loss-making Fertilisers and Chemicals Travancore Ltd (FACT), even as it is making a high-pitch campaign to bring the public sector unit under the cooperative sector, stopping the ongoing privatisation process.

FACT is heavily loaded with a host of taxes from the state, including the entry tax on petroleum products of 30 per cent and a sales tax on input materials to the tune of 14 per cent. "It is a sad reflection of the state government''s lack of seriousness on the matter that it has not come out with an announcement on tax reduction for FACT," says a trade union leader.

The state government had asked the centre to postpone the privatisation process for three months, so that it can submit a viable proposal to bring FACT under the cooperative sector. "We have asked for three months, but the union disinvestment ministry has not given us any assurance. The ball is in the centre''s court now," says Kerala Cooperative Minister M V Raghavan.

Currently, the sales tax on input materials is 14 per cent, compared to a level of low 3-4 per cent prevailing in the neighbouring states. While the reduction in tax structure will bring down the tax revenue by about 20 per cent, sources say this needs to be seen against the backdrop of the direct taxes and duties of Rs 90 crore per year and the indirect taxes and duties of about Rs 80 crore FACT remits to the government every year.

"Unless and until the state government announces a tax waiver for FACT, the centre will feel that it is not serious in its efforts to retain the company under the cooperative sector. We won''t blame the centre for not giving any assurance," says the union leader.

To make matter worse for FACT, the state government recently raised the lease charges for the FACT land at Udyogamandal to Rs 6 crore. "This is more than double from the earlier rates. The state government is not translating its words into deeds," says a FACT official.