Tax cuts for cotton ginning, pressing in MP

Cotton ginning and pressing will be cheaper in Madhya Pradesh.

The MP government is likely to pare tax rates on the two activities. It has been reported that tax rates are higher in Madhya Pradesh than in other states. As a result, the industry with a combined turnover of Rs 800-1,000 crore is in a tight squeeze.

Most of the cotton and ginning units are in the west Nimar region and located in Sendhwa. A number of them have migrated to neighbouring Maharashtra since tax rates there are much lower.

Sendhwa cotton growers raised the issue at the "Laghu Udyog Panchayat", organised at Chief Minister Shivraj Singh Chouhan's residence this year. However, he had ignored their demands and a joint director rank official of the State Mandi Board had issued a letter to the Sendhwa Cotton Association that a cut in tax was not possible.

At present the state government levies 2 per cent mandi tax on cotton procurement from mandis, while the tax rate is 0.50 per cent in other states. "We are planning to bring it at par with Maharashtra," Commercial Tax Minister Babulal Gaur told Business Standard.

The Sendhwa mandi was once known as the biggest cotton mandi in Asia with arrivals of 850,000 bales. Due to low arrival and higher taxes, the number of cotton ginning and processing units has now reduced to only 24 from 110 in 1998.

"Low availability of power, law and order problems, higher power tariff, non-availability of cotton and callous neglect from government machinery have aggravated our problem," Gopal Tayal said telephonically from Sendhwa.

Mandis of Sendhwa, Khandwa, Kukshi, Dhar, Dhamnod, Manawar, Khetia, Pansemal and Ajand have reported low arrival of cotton. All mills needs at least 2500 bales of 160 kg each day. The other taxes which state government levies are entry tax 1 per cent and a cess 0.20 per cent (on per Rs 100 sales).

"We have been pursuing the matter at regular intervals although the state chief minister had assured us to sort out the problem by August this year. Two months have been passed but nothing has happened," Tayal added. Madhya Pradesh grows cotton on 7 lakh hectares against 8.6 lakh bales target this year (07-08).