Bonanza for textiles, but players would like more

If Budget 2004 gave textile firms flexibility in the tax structure, the 2005 edition had in store a series of fiscal and capital incentives ...

If Budget 2004 gave textile firms flexibility in the tax structure, the 2005 edition had in store a series of fiscal and capital incentives for the sector. The slew of measures in Budget 2005 include a 10 per cent capital subsidy scheme, de-reservation of 30 items from SSI and a reduction in duty on machiery and yarns.

Reaffirming government’s commitment to the sector, Finance Minister P Chidambaram said, ‘‘The government will continue to nurture the textile sector which has huge potential for employment and exports.’’

The Finance Minister focussed on textiles in the light of the post-quota regime and said investments in the sector was estimated to go up to Rs 30,000 crore from Rs 20,000 crore in 2004-05. Besides raising the allocation of technology upgradation fund (TUF) by Rs 435 crore, the budget announced a 10 per cent capital subsidy scheme of 10 per cent for textile processing sector. This is in addition to normal benefits under TUF scheme. Customs duty on textile machinery was proposed to be halved from the earlier 20 per cent and 30 textiles items, including hosiery, are being dereserved from the small scale list. Customs duty has been reduced on nylon chips, textile fibres, yarns, intermediates, fabrics and garments from 20 to 15 per cent.

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Excise duty is proposed to be slashed to 16 per cent from 24 per cent on polyester filament yarn. Terming the sector as a major employment generator, Chidambaram said the government proposed to adopt the cluster development approach for production and marketing of handloom products and textiles ministry will take up 20 clusters in the first phase at a cost of Rs 40 crore. He also announced that life insurance scheme for handloom weavers will now provide cover to upto 20 lakh weavers and also proposed to increase health insurance cover to two lakh weavers from 25,000.

While welcoming the steps, industry players, however, demanded for more. D K Nair, secretary general of the Indian Cotton Mills’ Federation said, “Mandatory excise on man made fibres should also have been reduced from 16 per cent to 8 per cent. The goverment should also have reduced excise on domestic machinery from 16 per cent to 8 per cent.’’