Agitated Sisspa members told newspersons here on Friday that the finance minister's decision to withdraw the exemption would result in many small mills in Tamil Nadu, Andhra Pradesh, Gujarat and Punjab closing down in the near future. The 9.20 per cent excise exemption enjoyed by the small spinning mills was withdrawn in the Budget following pressure from the bigger spinning mills.

The mills in the organised sector had, while seeking removal of the exemption, argued that the excise duty benefit enjoyed by the small scale sector had resulted in rampant excise evasion and uncompetitive environment.``Most of us produce only 20s hanks, 40s hanks and 40s weft which is not produced by the organised sector at all. Then where is the question of competition from the small scale sector?'' asks Sisspa president Mr UK Kanagarajan. A decision on the future course of action will be taken at the Association's meeting here on Monday. Small mills, registered with Sisspa, number around 300 and these have capacities of less than 2,200 spindles (most in the organised sector have much higher spindle capacity of 25,000 and plus). ``The small mills in the south produce around 48 million kg a year and the excise duty thereon is a paltry Rs 20 crore. Most of the evasion is carried out by the large sector. The large units are mismanaged, have higher overheads and there is large-scale siphoning of funds,'' said a Sisspa source.

Production of cotton yarn in the small scale sector had witnessed a robust growth of around 25 per cent during calendar year 2000 against the previous calendar. Many units, under this category, sprung up in Andhra Pradesh and Punjab. The finance minister had taken away the excise exemption in respect of cotton yarn, ball and roller bearings, arms and ammunition for private use, citing misuse of the benefit.