Mumbai, Feb. 28: The Union Budget for 2005-06 held out sops for some segments and disappointment for others in the textile industry. The man-made segment was disappointed with no reductions in the excise duties.

However, processors, handloom weavers, independent texturisers and hosiery makers were celebrating as finance minister P. Chidambaram showered these segments with major incentives.

Taking the cue from last year's budget, where Chidambaram went in for a major rationalisation in the excise-duty structure for the cotton textile industry, the man-made sector had nursed hopes of a cut in duties. This was expected to narrow the gap existing vis-?-vis the cotton stream of production.

However, these producers were disappointed to find the finance minister only bringing down excise duties on polyester filament yarn (PFY) to 16 per cent from 24 per cent. This move is expected to benefit majors like Reliance Industries Ltd (RIL) and the Delhi-based Indo Rama. It is felt that polyester textiles could now be a bit cheaper.

But excise duties on other man-made fibres, including polyester staple fibre (PSF), viscose staple fibre and acrylic staple fibre, were left untouched at 16 per cent.

Smooth texture

Industry circles said as excise duties on man-made fibres were not brought down, it affected the interests of the consuming industry.

Even as excise duties on these fibres were left untouched, the finance minister brought down the customs duty rates on polyester and nylon chips, textile fibres, yarns and intermediates, fabrics, and garments from 20 per cent to 15 per cent. He also brought down the customs duty on textile machinery to 10 per cent from 20 per cent.

Analysts feel that while these moves could benefit the consuming industry as it would lead to lower raw material costs, the bringing down of peak customs duties could expose the industry to tough international competition.

In a significant move, he also announced the de-reservation of 30 items in the category of textile products from the SSI list. While hosiery was one of these items, analysts feel that the move is positive in the post-quota regime.

For the processing sector, Chidambaram announced a 10 per cent capital subsidy scheme in addition to the normal benefits available under the Technology Upgradation Fund (TUF) scheme.

Under this scheme, a loan amount of Rs 8500 crore with a project cost of Rs 18,467 crore has so far been sanctioned over the past five years, while the amount disbursed stands at Rs 6,000 crore. Chidambaram today further revealed that the TUF scheme is being continued with an enhanced allocation of Rs 435 crore.

Gautam Singhania, chairman and managing director, Raymond Ltd, said the government has identified textile as a thrust area, which can create 1.2 crore jobs over the next 5 years.