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Textile and clothing: short of expectations

NEW DELHI: The budget proposals have been a mixed bag for the textiles and clothing sector (T&C) as even though it included several positive measures it fell short of the expectations of the industry, which had been faced with a serious problem because of a steep fall in exports due to the global economic slowdown.

A major highlight of the proposals is a substantial hike in the allocation for the Technology Upgradation Fund Scheme (TUFS) for the sector: from Rs. 1,090 crore last year to Rs. 3,140 crore for the current fiscal. Due to inadequate allocations in the past, there had been a backlog of more than one year in the disbursement of assistance under the scheme.

The hike in the provision for the current fiscal should help remedy the situation to a large extent.

The other announcements in favour of the industry include proposals to set up two more mega handloom clusters, one each in Tamil Nadu and West Bengal, and one more powerloom mega cluster in Rajasthan, in addition to the two mega handloom clusters at Varanasi and Sibsagar and two mega powerloom clusters at Erode and Bhiwandi approved in the last budget.

Further, the Finance Minister announced a proposal to re-introduce the four per cent optional excise duty for cotton textile products. This would allow the industry to once again use Cenvat credit on capital goods, dyes and chemicals, packing materials and other such products.

The Finance Minister has also proposed to restore the rate of eight per cent Central excise duty on manmade fibre and yarn on a mandatory basis and at stages beyond fibre and yarn at that rate on optional basis on the ground that these changes, along with duty changes on intermediates, would help ensure that duty on all types of manmade fibre and yarn and their intermediates would be the same and thus ease the problem of credit accumulation.

In a statement, Chairman, CITI, R. K. Dalmia, said that though there were several positive features in the budget proposals, they were not enough. “The budget is a missed opportunity for the Government to pull the export-oriented and labour intensive T&C industry out of its current crisis. The proposals are a mixed bag of certain positive steps and certain negative steps and these do not have the potentials to bring the industry back to the path of growth in production as well as exports”.

The Apparel Export Promotion Council also expressed dissatisfaction over the budget proposals. In a statement, AEPC Chairman Rakesh Vaid said, “We are disappointed as the sector was expecting cess holidays, similar to those available for special economic zones. Our power costs, credit costs and wages for labour are all higher than in neighbouring countries”.

Soundariya Preetha writes from Coimbatore:

The textile sector has welcomed the increased allocation in the Union Budget for the Technology Upgradation Fund scheme (TUFS) for textile units.

The Cotton Textiles Export Promotion Council Chairman, V. S. Velayutham, said enhanced Export Credit Guarantee Corporation of India cover at 95 per cent and extending interest subvention of two per cent on pre-shipment credit for employment-oriented export sectors such as textiles would help the sector.

The Southern India Mills’ Association Chairman, K. V. Srinivasan, said the textile industry expected a comprehensive relief package to revive and regain its competitiveness in the global market. The industry was expecting benefits such as reduced working capital cost. Mr. Srinivasan expressed the hope that the Foreign Trade Policy would address issues such as anomalies in the duty drawback rates and Duty Entitlement Passbook Scheme (DEPB).

The Tirupur Exporters’ Association President, A. Sakthivel, welcomed the inclusion of few more items for textile garments for import under the Export Promotion Certificate scheme.

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