Sales tax exemption demanded for resuming Dunlop production

Kolkata, Nov 23: Claiming he had no intention of closing down tyre manufacturing firm Dunlop, chairman Pawan Kumar Ruia Sunday asked for sales tax exemption from the West Bengal government and an agreement with the workers for increasing productivity before resuming operations at the Sahaganj factory.

A week after suspending production at the factory in Hooghly district neighbouring Kolkata, Ruia said he was negotiating with the banks for a working capital loan of Rs.700 million in the first phase.

"Our total shortfall is Rs.2 billion. But we are expecting to tie up soon with a bank for an initial amount of Rs.700 million," Ruia said at a media conference here.

Ruia, who is scheduled to meet state labour minister Mrinal Banerjee Monday, demanded a sales tax exemption for 12 years as part of the ailing company's long-term revival plan.

Seeking to revisit the production norms with workers, Ruia said the present rate of churning out 15 tyres per machine each day needed to be upscaled to 20-24 tyres.

Ruia said the sales tax exemption was part of the incentive package his company was supposed to get from the government. "But we are still awaiting the relief."

Despite requests that the government source all its tyre requirements from the company, Ruia said this hasn't happened. "We have not got that, though we are supplying to West Bengal State Transport Corporation," he said.

The chairman of the Rs.15-billion Ruia Group said he has already injected more than Rs.5 billion in Dunlop and termed the recent development as 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. Nor is there any plan to use the land for real estate business. No question of going for a special economic zone (SEZ) also.

"A temporary setback cannot be termed a permanent closure. Let people have some patience, and production will start soon," said the Kolkata-based businessman, who bought over Dunlop India from Manohar Rajaram Chhabria's family in late 2005.

Ruia, however, could not give the exact date for restarting production. But he gave a broad time frame of 15 days to two-three months.

He said with a severe drop in primary demand, estimated to be in the region of 40 percent, the company has cut its expenses and even the managerial staff are 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 1,202 workers of the Sahaganj factory being paid a monthly subsistence allowance of Rs.2,000, the salary bill per month would come down to Rs 2-2.4 million from Rs.7-8 million.

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"This arrangement will continue latest up to March. But I am confident we can start production much before that," he said.

While ruling out any retrenchment even after resumption of production, Ruia said though the factory has a full capacity of 130 tonnes a day, due to the ongoing economic meltdown, it would cut production up to the break-even point. At present, the factory was producing 40 tonnes daily.

Ruia said the decision to suspend production and give the subsistence allowance followed an agreement with the unions. "I am prepared to talk to everybody," he said.

"I understand the workers wanted some from the corporate office to sign the pact with them. If they so desire, officers from the corporate headquarters will go," he said, but added had no plans to visit the Sahaganj unit now.

He claimed the company has sufficient orders, and there was no news that the orders have been cancelled due to the slowdown.

Ruia said since taking over in 2005, the present management has paid Rs.700 million for clearing old dues. "Of the 563 employees who opted for the early retirement scheme, settlement for 86 will be made by December-end. The arrears of the others will paid in the next three-four months."

To a query about the workers not getting their salaries for October, Ruia said "That is part of the ongoing negotiations".

Citing lack of demand due to the global recession, the tyre major Monday stopped production at Sahaganj, triggering angry reaction among workers and political parties. Production at the Ambattur factory in Tamil Nadu has also been suspended, and Ruia said there was no possibility of that unit restarting ahead of Sahaganj.

Commercial production at the ailing tyre major's Sahaganj factory had resumed Jan 14 last year, after a five-year closure.