The Hindu : Special incentives for textile, steel industries

Online edition of India's National Newspaper
Friday, Mar 01, 2002

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Special incentives for textile, steel industries

By Our Special Correspondent

NEW DELHI FEB. 28. The Finance Minister, Yashwant Sinha, today offered some tax sops for boosting industrial growth but disappointed domestic industry by failing to produce the long-awaited revival package in the budget proposals for 2002-03.

Instead, an attempt has been made to lure foreign investors by cutting corporate tax from 48 to 40 per cent. This brings them on a more level-playing field with domestic corporates and aims at creating a better climate for foreign direct investment.

Mr. Sinha has, however, provided special incentives for the textile and steel sectors. The incentives would enable the textiles industry to meet the challenges posed by the opening up of the domestic economy and phasing out of the Multi Fibre Agreement (MFA).

Seeking to provide a stimulus for overall industrial growth and fresh investments, the Minister has included some measures in the area of direct taxes. These include depreciation allowance at the rate of 15 per cent on new investments and expansions by a minimum of 25 per cent.

For the small scale sector, capital gains exemption has been allowed on amounts invested in bonds issued by the Small Industrial Development Bank of India (SIDBI). Similarly, full tax exemption has been given to the newly set up credit guarantee fund trust for small industries.

On textiles, Mr. Sinha's package of excise duty incentives includes granting a remission of four per cent on the existing CENVAT rate of 16 per cent. The 12 per cent dispensation will continue for the next three years on fabrics, made ups and garments but on industrial fabrics it will continue at 16 per cent.

To enable the industry to modernise and acquire new technology, excise duty is proposed to be exempted on automatic shuttleless looms as well as on specified processing machinery and specified silk reeling, weaving and twisting machinery. Customs duty on such machinery is being reduced from 25 to 10 per cent. Specified jute machinery is proposed to be exempted. "I hope this package will enable the textile industry to face global competition," the Minister said.

Noting that the steel sector had been affected by a slowdown in demand and had suffered large losses, he proposed to lower customs duty on numerous refractory raw materials by 10 per cent. The duty on graphite electrodes of over 24 inches diameter is also being cut from 25 to 15 per cent. Ships imported for breaking will now be charged 15 per cent customs duty as against 5 currently but countervailing and special additional duty will be removed. This is to reduce disparity between rolled products produced by the steel plants and cheaper products from ship breaking.

Responding to the steel industry's concerns over imports of seconds and defectives at cheaper prices, the basic customs duty is proposed to be raised to the bound rate of 40 per cent. In contrast, customs duty on non-ferrous metals is being reduced due to their wide application. Copper, zinc and lead duties will fall from 35 to 25 per cent.

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