Sales Tax Exemption, Productivity Agreement Sought By Dunlop India

Pawan Kumar Ruia claims he has no intention of closing down Dunlop operations in India. Before activities can resume at the company’s Sahaganj factory, however, he wants the West Bengal government to arrange sales tax exemption and an agreement with employees assuring an increase in productivity. Production stopped at the factory on November 17.

Negotiations with banks are ongoing for a working capital loan, reports The Hindu newspaper. The first phase of this loan would be valued at Rs 700 million (£9.39 million). “Our total shortfall is Rs 2 billion,” said Ruia at a media conference. “But we are expecting to tie up soon with a bank for an initial amount of Rs700 million.” Ruia wants a sales tax exemption for 12 years as part of the company’s long-term revival plan, says The Hindu. Furthermore, he believes the current production rate of 15 tyres per machine daily needs to be boosted to between 20 and 24 tyres.

Ruia said the sales tax exemption was part of the incentive package his company was supposed to get from the government, however he says the company is “still awaiting the relief.” He adds that, despite requests that the government source all its tyre requirements from the company, this hasn’t happened. “We have not got that, though we are supplying to West Bengal State Transport Corporation,” he said.

The Ruia Group chairman says more than Rs 5 billion has already been injected into Dunlop, and he termed the recent development a ‘temporary setback’ caused by the global recession. “As the banks lost liquidity and risk appetite, there was a delay in sanctioning the working capital loan for us. But due to the government’s actions, the liquidity with banks seems to be improving,” Ruia said.

“Let me tell everybody that, after three years of hard labour, I don’ foresee any permanent closure….A temporary setback cannot be termed a permanent closure. Let people have some patience, and production will start soon.” While Ruia did not give an exact date when production would restart, he indicated it would be any time from in two weeks to three months. A decline in primary demand of up to 40 per cent, he added, mean that the company has been cutting expenses, and even managerial staff is working on a reduced salary.

“There were two options before us – suspension of operation without paying wages, or paying a monthly subsistence allowance to the workers. We have gone for the second option,” he said. With the payment of a Rs 2,000 (£30) monthly subsistence allowance to the Sahaganj factory’s 1,202 workers, the company’s salary expenditure per month would come down to Rs 2-2.4 million from Rs 7-8 million.