Finance minister P Chidambaram has kept his promise to nurture the textile sector. The slew of measures announced for the textile sector is a clear indication and will help it take the challenges of the quota free regime.
The gross budgetary support is up 16.9 per cent, investment of Rs30,000 crore is proposed as against the investment of Rs20,000 crore last fiscal and an allocation of Rs435 crore has been added to the Rs25,000 crore Technology Upgradation Fund (TUF).
Customs duty on polyester and nylon chips, textile fibres, yarns and intermediaries, fabrics and garments is reduced from 20 per cent to 15 per cent. Excise duty on polyester yarn has been reduced from 24 per cent to 16 per cent.
Customs duties on textile machinery have been cut from 20 per cent to 10 per cent. A 15 per cent cut in import duty on textile products has also been announced. A 10 per cent capital subsidy scheme will be introduced for the textile-processing sector.
Independent texurisers will have the option to avail the exemption route or pay 8 per cent excise duty with cenvat credit. Small and medium sized manufacturers stand to gain from the announcement to de-reserve 30 textile products' items including hosiery.
Chidambaram announced the launch of a manufacturing competitiveness council to help small and medium enterprises. Employment in the textile sector is expected to shoot up by 1.2 crore (12 million) jobs in the next five years.
The finance minister also announced several steps to benefit the handloom sector. A cluster development approach will be adopted for the production and marketing of handloom products. Handloom weavers. In 2005-06, in the first phase, 20 clusters will be taken up with an expenditure of Rs40 crore.
Life insurance scheme will be extended to 20 lakh weavers from the current 50,000 at an expenditure of Rs30 crore per year. Health insurance for weavers will cover 20 lakh weavers from the current 25,000 at a cost of Rs30 crore per year.
The textile stocks have firmed up, a positive signal that the industry mood is upbeat. According to CRISIL, the capital subsidy scheme will boost investment in textile processing and the TUF extension would benefit spinning companies like Welspun and Vardhman.
Talking to domain-b.com, Harminder Sahni, associate director, KSA Technopak, said, "Capital subsidy is an excellent step. Other steps taken outside the budget (like SEZs and changes in labour laws) in tandem with this will benefit the sector.