Textile Industry    (updated - 13 June 2009)
The government is likely to come up with export sops for the domestic textiles industry in the upcoming Budget, including a rise in duty drawback rates. The over $55-billion industry, one of the three largest foreign exchange earners along side IT and gems and jewellery, is not keeping pace with the government’s projections for the current fiveyear Plan and has witnessed decline in exports since August last year on a monthly basis.
A senior official in the Ministry of Textiles told Business Standard that export-related sops were likely in the upcoming Budget in July. “Though the industry has put forward several suggestions, accepting all of these may not be possible. However, on the exports front, a couple of changes, including a rise in duty drawback rates, are expected,” the official said.
The global slowdown has caused closure of some exportoriented textile units and affected exports. In the last few quarters, India has lost its cost competitiveness to major textile exporting countries, including China, Bangladesh and Vietnam.

Duty drawback is the duty rebate on any excisable imported material used in manufacture or processing of goods which are made in the country and exported. It is equal to the Customs duty paid on imported inputs, including special additional duty and excise duty paid on indigenous inputs.

Sector Specific - Textile Industry                

RK Dalmia, president, Confederation of Indian Textile Industry, said, “We have asked for an increase of at least 5 per cent in duty drawback rates. In case of garments, the rate should be raised from 10 per cent to 15 per cent, whereas on other textile products, it should be increased from 5 per cent to 10 per cent.” He added that once duty drawback rates were increased, the industry would regain its competitiveness and would have a level-playing field with global peers. The textile and clothing industry had embarked on a vision of capturing markets worth $110 billion by 2011-12.

The textile ministry, in its Budget wish list, has recommended additional tax benefits and increased interest subsidy for exporters.
“As part of the short-term strategy, the government will try to rationalise the fiscal structure, exempt (exporters) from service tax, reduce interest rates on pre- and postshipment credit, and facilitate faster clearance of arrears of terminal excise duties and central sales tax,” said Union Textiles Minister Dayanidhi Maran.

But he did not provide details of any tax changes that the textile ministry has sought from its finance counterpart.
Clearing the backlog of Technology Upgradation Fund Scheme (TUFS) would be high on the list of priorities for the ministry, he said in an interaction with industry representatives. Under TUFS, the government provides 5 per cent interest subsidy on loans taken by textile firms to upgrade their technology.

The assurance comes in the backdrop of around 2 per cent decline in India’s textile exports, which are estimated at $21.75 billion in 2008-09, due to slump in key markets such as the US and Europe. “The industry is optimistic and so am I that exporters will get back to the regular level of 7-8 per cent growth yearon-year,” added Maran.
source - BS

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