The Telegraph
Since 1st March, 1999
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Singh spins a bonanza for textiles

Mumbai, Feb. 28: It was smiles for a large swathe of the textile industry as the finance minister brought down customs duty on textile machinery, lowered excise duties and removed the scheme of deemed credit so as to complete the Cenvat chain.

The reduction of customs duty on a large number of textile machinery and their parts from the existing 25 per cent to just 5 per cent is expected to give an impetus for modernisation of the textile industry even as it will deal a body blow to textile machine manufacturers.

The textile package had its doses of populism too. The finance minister Jaswant Singh targeted the decentralised power-loom sector by proposing to strengthen the existing programme for induction of technology in the weaving sector by offering a ‘power-loom package for modernisation. According to Singh, this package will see the Technology Up-gradation Fund Scheme being enlarged to cover modernisation of power-looms.

Further, to create a better working environment and obtain higher productivity, a new Power-loom Workshed Scheme will be introduced by the ministry of textiles together with the state governments moreover, as a ‘welfare measure’, all powerloom workers will be covered under the Special Insurance Scheme, which will provide them insurance cover against death, accident and disability.

Singh, while recognising the need to prevent sickness in the textile industry, announced that the government is considering a mechanism for restructuring the debt portfolios of viable and potentially viable textile units. His proposals saw a large part of the industry welcoming it even as few pointed out that the Budget is “not as helpful as it is made to be”.

Readymade garment manufacturers that included Raymond Ltd, Madura Garments had reasons to be happy as finance minister brought down excise duties on garments from 12 per cent to 10 per cent. He also lowered the customs duty on apparel grade raw wool from 15 per cent to 5 per cent.

Speaking to The Telegraph, Nabankur Gupta, group president, Raymond Ltd pointed out that while the Budget is ‘by and large well balanced’, it contained several positives for the textile and garment industry in particular. He welcomed the finance minister's move to lower excise duties and customs duties of apparel grade raw wool.

At a time when most of the garment brands are experiencing de-growth, Gupta said that the finance minister’s action will improve the sentiment and give an impetus to growth. “In the garment business, even a slight fall in price, can improve sentiment,” he added indicating that the industry is likely to pass on excise duty concessions to the consumers.

In the budget, Singh brought down excise duties on all spun and other filament yarns from 16 per cent to 12 per cent and retained the 8 per cent excise duty rate for pure cotton yarn only. Further, excise duty on all knitted cotton fabrics and garments were reduced from 12 per cent to 8 per cent and that on all woven fabrics and other knitted fabrics from 12 per cent to 10 per cent.

While exemption for all knitted and unprocessed woven fabrics were withdrawn, he removed the scheme of deemed credit so as to complete the Cenvat chain and retained exemption for hand processed fabrics but only if no power or steam is used in any process. Singh also continued the existing exemptions for handloom fabrics, silk, khadi.

However, R. L. Toshniwal, president, Indian Spinners Association pointed out at that the modvat chain will be completed if the government is able to keep the provision of hand processing without the use of power so that more than 50 per cent cloth which is now going through the route of hand processing does not become the route of evasion of excise duty.

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