Agra has evolved into a major manufacturing hub for power transformers, with over two dozen small and mid-scale transformer and component manufacturing units operating from the town.
Despite unfavourable conditions like power shortage and high taxes in the state, the transformer manufacturers of Agra have been able to give strong competition to the transformer manufacturing units of Uttarakhand, which are availing the advantage of the industry-centric policies in the state.
Industry sources claimed that there were about 200 transformer manufacturing units functioning in the entire state and nearly 250 other units engaged in the manufacture of transformer components that employed over 10,000 people.
With the Uttar Pradesh government announcing a raise in value added Tax (VAT) on transformers and other associated machinery and spare parts from 4 per cent to 12.5 per cent, the transformer units of the state have seriously begun to look at the prospects of relocating to Uttarakhand.
Talking to Business Standard, Rajiv Mittal, MD, Technocrate transformers, said the transformer manufacturing industry of Agra had already been struggling for survival in view of the 2 per cent difference in taxes between Uttarakhand and Uttar Pradesh which caused a lot of business to drift from Agra units to Uttarakhand.
The government’s decision has raised the difference in taxes from 2 per cent to almost 11 per cent, which would result in the complete decimation of transformer industry, not only in Agra, but the entire state. Since VAT had also been raised on transformer components, the production cost of transformers will also rise by about 8.5 per cent compared to other states, pushing the industry in deep crisis.
He added there were indications that the state government was mulling invoking a 2 per cent entry tax on Aluminum. This, if brought into effect, will become an extra burden on the transformer units, as Aluminum is the basic raw material used in the manufacture of power transformers from 10 KVA to 250 KVA and copper was only used in transformers with a rating of 400 KVA and above.
He said the UP Transformer Industries Forum had raised its objection to the government and will be discussing this issue with the state government officials next week. If the government still did not budge from its decision to raise the VAT slab for engineering components, the transformer units will be forced to relocate to Uttarakhand for their survival, he said.