Maharashtra govt alleged to have favoured Gujarat Ambuja
Employees' unions of three major cement companies have filed a public interest litigation in the Nagpur bench of the Bombay high court alleging that the Maharashtra government is favouring cement giant Gujarat Ambuja Cement by allowing sales tax benefits worth Rs 18.81 billion against a capital investment of only Rs 6 billion.
A Gujarat Ambuja spokesperson refused to comment on the issue saying the company has not received any intimation of the said PIL. "Since we have not received any information regarding the PIL, we cannot comment on the issue," the spokesperson said.
A division bench consisting of Justices J N Patel and R S Mohite on Tuesday issued notices to the state government and Gujarat Ambuja directing the former to file a detailed and reasoned out reply justifying the sales tax concessions extended to the cement major.
The PIL, filed by the employees' union of three cement producers - Larsen and Toubro Ltd, ACC and Manikgarh Cement - has challenged the concession extended by the Maharashtra government through a resolution dated August 11, 1998 to "very large projects" - a category under which the Ambuja Cement plant at Chandrapur is covered.
The PIL apprehended that, due to excessive and heavy sales tax concessions, all other cement producers, including ACC, L&T and Manikgarh, would be adversely affected.
The petitioners stated that the state government had declared certain incentives on May 7, 1993 to promote industries in underdeveloped and developing parts of the state.
These incentives were referred to as the "package scheme of incentives" meant for units proposed to be set up in "developing regions of the state". Various sales tax incentives were offered to new units.
One of the main features of the resolution was the sale tax incentive offered by way of exemption from payment of the levy to the extent of 110 per cent of fixed capital investment.
The incentive was offered along with a deferral clause allowing repayment over a period of 10 years from the date the incentive was availed. Further, the amount too was to be remitted in five equal annual installments.
The PIL stated that the Maharashtra government, by a resolution dated August 11, 1998, amended the package scheme of incentives by introducing one more category of "very large projects".
These projects were described as having capital investment of more than Rs 5 billion to Rs 7 billion and were proposed for Vidarbha and Marathwada regions of the state. The modified scheme offered sales tax incentives without any monetary ceiling for a period of 18 years.
The period was extendible for another seven years if the benefit utilised by the unit in 18 years was less than 110 per cent of the investment.
The deferment too was for a period of 18 years from the date of availment and was repayable in seven equal annual installments.
The PIL alleged that the new scheme of incentive was floated only to support Gujarat Ambuja which had put up a 2 million tonne plant at Chandrapur.
The plant had started operations in January 2002 with a capital investment of Rs 6 billion. The petitioners claimed that the respondent Gujarat Ambuja would reap benefits totaling 314 per cent of the capital investment or a whopping Rs 18.81 billion.
The PIL pointed out that the current price of cement was Rs 140 per bag or Rs 2,800 per tonne. It also noted that about 1.8 million tonne per annum of cement was sold in Maharashtra.
The existing rate of sales tax in the state was 15.3 per cent and thus, in 18 years, the sales tax benefits likely to be bagged by the respondent company would be to the tune of Rs 18.81 billion or 314 per cent over the capital investment, the PIL claimed.
It said that if the said plant was allowed to reap such huge benefits it would have a crippling affect on other integrated plants in the region.