Budget does little for troubled textile sector

07 Jul 2009

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The union budget announced on Monday has by and large disappointed the textile industry, as some key demands were not met despite some positive announcements for the export-oriented sector.

Perhaps Sunil Khandelwal, chief financial officer of Alok Industries Ltd, summed it up best, ''It is positive that they have not introduced anything negative, and so I would call it a neutral budget.''

The labour-intensive industry, with a turnover of Rs2,67,000 crore a year, is estimated to have lost nearly a million jobs over the past year as the economic slowdown hurt demand for apparel, and firms cut production to avoid inventory pile-up.

The embattled industry has been asking for removal of excise duties on all man-made fibres and scrapping of service tax. It also wanted restoration of a 4 per cent interest rate subsidy on bank loans for exporters.

The government announced extension of the existing 2 per cent interest subvention scheme for exporters till March 2010, but did not increase the subvention to 4 per cent.

While the reintroducton of 4 per cent optional excise duty on cotton textiles would benefit the domestic industry, the hike in duty from 4 per cent to 8 per cent on man-made fibres (MMFs) will further increase the disparity between natural fibres and MMFs, reducing the latter's profitability. Also, the much-hoped announcement of a national fibre policy will have to wait.

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