Globally, man made fibres account for over 60% of fibre consumption. In India, they account for around 40% of total fibre consumption and the share of man-made fibre based products in our textile exports is less than 25%. One of the major reasons for low utilisation of man-made fibres in India is uncompetitive cost of fibres and duties play a major role in making our man-made fibres expensive.
Two producers account for most of the polyester production in India and in the case of viscose there is only one major producer. This situation allows fibre producers to fix their prices on the basis of import parity. In other words, producers calculate the duty paid landed price of imported fibres and fix their prices at that level, in order to make imports an unviable option. In the process, our spinners are actually paying customs duty even for domestically produced fibres.
Basic Customs Duty applicable to man made fibres is 5% and excise duty has been increased from 4% to 8% in this year’s Central Budget. With Additional Customs Duty, Education Cess and Countervailing Duty, the total incidence of duty on imported fibres amounts to 18.62%. On top of this, Anti Dumping or Anti Subsidy Duties are also applied on imports quite often.
The increase of 4% in Excise Duty alone has made our fibres costlier by Rs 2,800 to Rs 4,500 per tonne, for various man made fibres and their blends. Fibre is the primary raw material for the textile industry. The increased burden of duty will have to be borne by the textile industry; they will not be able to pass it on to their consumers because of slackness in demand in the context of economic slowdown. Our textile industry is already in a crisis and the increased duty burden would only cripple it further.
The only objective of the duty increase seems to be to generate additional income for government. And any move for revenue mobilisation through increased duties on primary raw materials of labour intensive industries can only be compared with killing the goose that lays the golden egg.
Source : The Economic Times