In case the state government cannot extend the tax holiday, the company wants the state government to drastically reduce sales tax to 2 per cent from the current level of 14 per cent.

The one million-tonne cement project is likely to be commissioned shortly.

Indo Rama Cement president KK Taparia in a memorandum to the state government said such sops will make the project more competitive and help the company in total utilisation of the slag from the Ispat group's steel project at Dolvi.

The company has entered into a 20-year agreement with the Mittals controlled Ispat Metallics for supply of slag, while clinker will be procured from cement makers in Gujarat. The company has demanded that the maximum limit of sales tax exemption should be 80 per cent (which means up to Rs 120 crore) of the total investment for14 years.

However, the state government sources told The Financial Express that the company will be entitled to get sales tax exemption for five years and not for 14 years as the project falls in B zone. As per the package scheme of incentives 1993, the maximum limit of exemption will be 60 per cent (up to Rs 90 crore in this case) of the total investment. State government sources said that had the project investment been to the tune of Rs 300 crore, it would have got sales tax exemption for 14 years.

"In order to compete in the market with the established players and to have a growth of cement production in Maharashtra, we put forward our request for the concession in sales tax," Taparia said.

The Indo Rama Cement president has stressed the need for such incentives, especially when the cement industry was passing through a difficult stage. He said that Goa has already accorded sales tax concessions to a similar plant there. According to him, the production of portland slag Cement will have thebearings of eco-friendly product.

The company has said that the project will be useful to service the fast developing parts of Maharashtra, particularly Pune-Mumbai and Mumbai-Sindhudurg corridor, where a lot of infrastructure and construction activities were in progress.

INSIGHT
Selective sops will be detrimental to other players
Any further incentive given to the Indo Rama project will adversely affect the other cement suppliers such as L&T and Gujarat Ambuja which supply in the Mumbai region. First of all, slag cement is cheaper and sales tax incentives will make it more so, which will affect already depressed cement prices.

Further, large industrial projects are implemented on commercial considerations, and every time selling prices dip these companies should not run to the government for sops. If that is the case, there would be no end to requests for relaxing indirect tax obligations of companies. The Maharashtra state government has already made an exemption in the case ofTelco's car project but set some stiff benchmarks for availing of these benefits. Keeping in mind the state's precarious finances, it should refuse to relax norms further.