Budget does little for troubled textile sector

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.