Tamil Nadu Ready to Forego VAT on Naphtha, Favours Subsidy

Published: 31st December 2014 06:04 AM  |   Last Updated: 31st December 2014 06:04 AM   |  A+A-

CHENNAI: Chief Minister O Panneerselvam on Tuesday informed the Centre that the Tamil Nadu government was ready to forego VAT on naphtha used by fertiliser manufacturing units SPIC and Madras Fertilisers Limited (MFL), with a view to facilitate these units, which remain closed since October 1, to resume production. He also renewed his request to Prime Minister Narendra Modi to immediately issue a notification for the continuance of the subsidy to the two fertilizer units till such time gas connectivity is provided to them by the Centre.

The CM, in his letter to the Modi said recently,  the Union Fertilizer Secretary informed the TN government that the Centre had decided to allow the operation of these units for a further period of 100 days and requested  the State government to consider waiving VAT on the Naphtha used by them. In this connection, he pointed out that Tamil Nadu was already facing a huge financial crunch and any additional financial outgo at this juncture would be very difficult to manage considering the limited sources of revenue to the State. “However, in the interest of commencing the operations of these two plants, the livelihood of hundreds of workers and the interest of farmers, the Tamil Nadu government is willing to forego VAT on naphtha used by the two urea producing fertilizer plants”, the CM said.

“The oil marketing companies are charging the import parity price for naphtha supplied by them to the fertilizer units, which is significantly higher than the price at which the oil marketing companies export naphtha. Hence, it would only be fair for these companies to claim only the export parity price for the naphtha supplied to the fertilizer units”, the CM said and added that for logistics and other reasons, Tamil Nadu’s allocation of urea should be made from the production of these two fertilizer units, located in Tamil Nadu.

Following a request from former CM J Jayalalithaa, the Centre had approved the extension of subsidy till September 30. However, since no decision was communicated regarding the continuance of the subsidy, the plants had remained shut since October 1.

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