TN Levy To Hoist Input Bill For Auto Parts Firms

The decision by the Tamil Nadu state government to levy entry tax on certain key raw materials like aluminum, iron and steel is likely to increase the cost of production for auto component manufacturers by 3 per cent to 15 per cent. Auto component units situated in Tamil Nadu manufacture products worth Rs 5600 crore per annum.

Automotive Component Manufacturers Association of India (Southern Region) chairman S Seetharamaiah said with automobile manufacturers unwilling to accept any price increase at this juncture, they have to either borne the entire additional burden or lose market share to manufacturers in other states. "Production from the state will shift to other states," he said. According to him, Tamil Nadu alone contributes around one-third of the total auto component industry's turnover. ACMA has estimated the auto component industry size at Rs 17,200 crore during the financial year ended March 2001.

The southern Region, comprising Tamil Nadu, Karnataka and Andhra Pradesh, contribute 47 per cent of the industry's turnover.

Industry observers say that since a majority of auto component firms in Tamil Nadu manufacture components/ parts that uses aluminum, iron and steel extensively, the impact would be higher when compared with pressing and plastic components manufacturer. Seetharamaiah said that they had represented their case to the state government and said the government had agreed to look into the issue and take appropriate decision. "We are hopeful that the government will agree to our view point or else units in Tamil Nadu will become less competitive," he said.

With the Assemble session in progress, government officials were unwilling to comment on this issue. There is a general expectation that entry tax on several items including aluminum, iron and steel will be withdrawn.