The government’s decision to make Cenvat optional for the textile sector has enthused the bigger companies to expand and make the best of the two options.While the Rs 2,100-crore Vardhman group has decided to opt out of the Cenvat chain for its Rs 250 crore sewing thread business, the Rs 2,500-crore Nahar group is considering the zero duty option for 60 per cent of its products.“In the textile industry, many companies are examining their options. Where excise duty is high, they are claiming Cenvat credit, otherwise they are opting out,” RSW joint managing director Riju Jhunjhunwala explains. The company, which has an exports turnover of Rs 250 crore, has decided to avail of the Cenvat credit for its exports.“Policies such as optional Cenvat and TUF (technology upgradation fund) prove the government’s commitment to help the textile industry to face global competition. Our group is investing Rs 400 crore to double its turnover to Rs 1,400 crore by 2005-end,” says Abhishek Industries CEO Rajinder Gupta. The company expects 75 per cent of its revenues from the textile business, its other business interests being in chemicals and paper.Adds Nahar Industrial vice chairman & managing director Kamal Oswal, “The policy has encouraged us to expand. What we could not do in the last 30 years, we will do in just two years.” The group’s expansion plans involves Rs 500 crore investment over the next two years.But companies engaged in synthetic textile segment and where the value addition is meagre are not very happy. “In categories where the excise duty on finished goods is more compared to the duty on raw material, it is better to stay outside the Cenvat chain. In other categories where excise duty on finished goods is same or lower compared to the duty on raw materials it is better to stay inside the Cenvat chain,” Indo Rama Textiles Ltd (IRTL) executive director Vishal Lohia said.A player predominantly in the synthetic side, Lohia is concerned about the bottomline growth. “With this policy, bottomline of yarn companies making coarser yarns with less value addition will be adversely hit. This is because the duty on raw materials is normally higher than the duty on finished goods,” he adds.
