labels: industry - general, economy - general, union budget 2006
Polyester players rejoice news
Shubha Madhukar
28 February 2006

In a rather neutral budget, the finance minister described the man made textile industry as a growth and employment driver and therefore as an encouragement to it, announced several measures.

As the analysts expected, import duty on fibre intermediates such as DMT (dimethyl terephthalate), PTA (purified terephthalic acid) and MEG (monoethyleneglycole) has been reduced from 15 to 10 per cent. Excise duty on all man made fibres and yarns have been reduced from 16 per cent to 8 per cent. This however needs to be seen in the context of the 2 per cent cess being reintroduced on these items. Import duty on paraxylene has been cut down to 2 per cent. Yarn depots will be established in various parts of the country to ensure continuous supply yarn to weavers.

However, as Rahul Mehta, vice-president, Clothing Manufacturer Association of India and managing director, Creative Group - a leading exporter of readymade garments - point out, "The reduction of import duties from 15 per cent to 10 per cent, a welcome step, has to be viewed along with the imposition of an across the board levy of 4 per cent (countervailing duty) CVD - this more than nullifies the reduction in import duty."

The 'technology upgradation fund' (TUF) allocation has been increased from Rs435 crore to Rs535 crore. The finance minister proposed to provide Rs189 crore for the scheme of Integrated Textiles Park.

The finance also announced measures for the jute and handloom sector. A scheme, similar to TUF is to be introduced for the handloom sector to provide interest subsidy on term loans. A Jute Technology Mission will be launched in the current fiscal and a National Jute Board is to be formed. He also proposed to form an empowered committee for cluster development of handloom products. It is also proposed to launch a 'handloom' mark. Mehta adds, "These are very positive steps, and if implemented quickly and efficiently, will help strengthening these traditional sectors."

Overall, there's a mixed feeling within the industry. Sops announced for apparel parks will be positive for Arvind Mills and Raymond. Excise duty cut on man made fibres will be positive for Indo Rama and JBF Industries. Peak customs rate cut will be negative for Indo Rama Synthetics.

Contrary to expectation, no duty cuts were announced for the textile machinery. There were no proposals or incentives for the cotton textile industry and the readymade garments sector either. Labour laws that affect the sector also went untouched. The readymade garment industry too is disappointed as though the FM mentioned in his speech the importance of merchandise exports, he did not follow through with any announcements on this segment.

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Polyester players rejoice