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July 8, 1997


Cable manufacturers-DoT row over sales tax

Domestic jelly-filled telephone cable manufacturers have been waiting anxiously to hear the fate of their bids placed with the Department of Telecommunications three months ago.

Domestic JFTC players, who had a sluggish performance in 1996-97, are hoping that 1997 will bring in some respite. In particular, they are banking on deals with DoT for the supply of 35 million cable kilometre of different sizes to provide a boost, but DoT is caught up in a fresh round of controversy and is yet to finalise the orders.

This one seems to involve the issue of sales tax. When the tenders were invited, DoT had made it clear that the basis of evaluation would be the composite price which includes the basic price, excise duty and sales tax.

As per the tender evaluation criteria the vendor rating would then be arrived at based on the 60 per cent weightage assigned to composite price, 30 per cent to delivery schedules and the balance would be assigned to the quality criterion.

While the lowest bidder, termed as L1, would get 20 per cent of the total tender, the balance 80 per cent of the order would be distributed amongst the remaining 19 bidders according to their respective rating, it said. So far so good.

However, controversy struck when the tender finalisation was about to be made. Some companies raised objections with regard to the composite prices on the grounds that the others had taken advantage of the benefits of a sales tax exemption, which had enabled them to quote lower prices.

Companies like Sterlite Industries, Gujarat Telephone Cable Limited and Paramount Cables enjoy sales tax exemption because they have set up huge capacities in backward areas.

But experts who are monitoring the telecommunications industry say that these companies have only quoted as per the ground rules laid by the DoT. They say that players who have not figured in the list (among the lowest bidders) are now complaining without reason that they are at a disadvantage due to the sales tax that they have to pay.

As the position stands now, Sterlite Industries is the L1 (lowest bidder) for abut 66 per cent of the sizes. Other companies like Finolex Cables, Upcom Cables and Usha Beltron quoted higher prices as they had to include the sales tax in their pricing, and they have now ended up with lower orders.

As per the tender norms, companies ranked L2 to L20 will now have to match the composite prices of the L1 bidder. Experts say that in doing so, these companies would end up with much lower basic prices, after deducting sales and excise duty. It is for this reason that these companies are demanding that the L1 bidder should keep its basic price the same as theirs.

- Compiled from the Indian media

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