The government is considering a proposal to restructure duties for the textiles sector in the upcoming budget in July. The over Rs 2 lakh crore domestic textiles industry, which is struggling to meet targets, has been one of the hardest hit in the global slowdown.
The Union textiles ministry believes there is need to rationalise duty structure for the textile industry. Textile commissioner, based in Mumbai, has forwarded a proposal in this regard based on the industry’s demand for reducing duties for man-made fibres (MMFs) and other items. The Confederation of Indian Textiles Industry (CITI), in its proposal, has requested a reduction in excise as well as customs duty on the man-made fibres. In many of the cases, the abolition of duty has been sought for.
Cotton prices have sky-rocketed as the government has raised the minimum support price for cotton last year by 40 per cent. This has lead to a huge increase in the cotton fibre, man-made fibre-based textile products have the lowest share in Indian industry compared to major textile-producing countries. Removal of duties would encourage increased utilisation of man-made fibres and this will help correct the mismatch in the pattern of fibre consumption between the domestic and global textile industries.
Manmade fibre yarns are produced from petrochemicals. There is need to increase the use of man-made fibres or synthetic yarns, as they are called, compared to cotton yarns to have proper balance as cotton production is subject to the vagaries of rain.
Officials in the Ministry of Textile said many of the demands from the industry bodies were genuine and have been conveyed to the Ministry of Finance.
Anil B Joshi, textile commissioner, Ministry of Textiles, told Business Standard, “We found that there were demands which should be met. Certainly, there will be some duty restructuring to make it rational and correct.”
Presently, there is a basic customs duty of 5 per cent on MMFs, 5-10 per cent on textiles machinery and 10 per cent on liquid fuels used for captive power generation by textiles and clothing units. Industry representatives have asked for the abolition of these duties.
Similarly, on the excise front, there is a mandatory excise duty of 4 per cent on all MMFs and 4-8 per cent excise on machinery and, all components and spares. CITI had asked for the removal of duty on MMFs and a reduction of 4 per cent duty on machinery.
The industry had also asked for withdrawal of the minimum support price (MSP) for cotton or to dispose of the procured cotton at international rates. In Aagust last year, the government had increased MSP by over 40 per cent for cotton year 2008-09. This contributed to pushing the cotton economy into a crisis. However, on this front Joshi said that a decline in MSP was unlikely.
Source : Business Standard