MUMBAI: To provide a much-needed boost to the textile sector in the quota free regime, Finance Minister P. Chidambaram on February 28 reduced the excise duty on all man-made fibre yarn and filament yarn from 16 per cent to 8 per cent simultaneously reducing the import duty on all man-made fibres and yarns from 15 to 10 per cent.
Consequently, the import duty on raw materials such as DMT, PTA and MEG was also reduced from 15 to 10 per cent and on paraxylene proposed to be reduced to 2 per cent.
Following encouraging response to the Technology Upgradation Fund Scheme (TUFS), the Finance Minister enhanced the allocation from Rs 435 crore to Rs 535 crore for the year 2006-07.
He also provided Rs 189 crore under the Scheme for Integrated Textiles Parks (SITP), launched in October 2005 with intention of creating 25 textiles park.
However, till date only 7 parks have been set up and 10 parks have been identified for development.
He said a Jute Technology Mission will also be launched during 2006-07 to harness the potential of the golden fibre and a National Jute Board would be established.
The Minister also assured that funds required would be made available once the outlay was finalised.
A cluster development scheme for the sectors like khadi and village industries, handlooms, handicrafts and textiles will also be adopted to promote manufacturing.
An Empowered Group of Ministers will be constituted to lay down the policy for cluster development and oversee the implementation.
For the handloom sector, the Budget maintained that Cluster Development approach will continue and proposed to cover an additional 100 clusters at a cost of Rs 50 crore in 2006-07.
It said yarn depots will be established in different parts of the country to ensure uninterrupted supply of yarn to weavers and proposed to launch a 'handloom' mark on the lines of 'woolmark'.
A scheme similar to TUFS will also be introduced for the handloom sector to provide interest subsidy on term loans and increased the provision for this sector from Rs 195 crore to Rs 241 crore for 2006-07.
Bharat Textile. com contacted some of authority persons concerning textile industry and wanted to know their opinions upon the budget.
Chairman & Managing Director of Raymond Ltd, Mr. Gautam Hari Singhania says that the Union Budget 2006 has strived to continue the reform process so that overall growth can be sustained. It is now upto the manufacturing sector to take it forward.
The great positive of this budget is that it is fiscally responsible. The focus on bringing down fiscal deficit will have a favourable impact on inflationary expectations. On a macro level, the financial deficit has been reduced this year and targeting a further reduction to 3.8% by next year is excellent!
For the textile industry in particular, an increase in TUF allocation and reduction in excise duty on synthetics have been announced which are welcome. Unfortunately there has been no mention about labour reforms which are key to the industry's growth potential to be realized in a significant manner.
Overall, as setting the course for the country to move to a higher trajectory of growth, the overall direction of the budget is positive and reflects confidence in the long term growth story of
Textile Commissioner Jagdeep Narayan Singh said that the budget is enthusiastic for textile industry. He said that the Finance Minister has fulfilled all the demands of industry.
He said that in textile industry there was 40% inclination towards man-made-fiber and 60% inclination towards natural fiber; but after the reduction of excise duty upon man made fiber from 16 to 8 percent, there will be certainly some changes.
In the same way, it will be easier for Indian textile and garment exporters to compete in international competition due to curtailing in import of man made fiber and yarn. Our export target will now be easily achieved.
Premal Udani, the President of CMAI said that the budget is disappointing. He said that the finance minister did not do any more for the textile industry despite knowing the fact that the textile industry has a potency to give massive employment after agriculture sector.
He said that a lot could have been done to enhance the opportunity of trade and employment.
He added that only one thing that is enthusiastic is the reduction of duty upon man made fiber.
Mr. Udani said that increase in service tax can cause price-rise; which is not a good sign.
He said that on the one hand we are taking to complete in the international market, on the other hand these steps will retard the rate of development. He said the budget is disappointing.
Indorama (Mumbai Division) President, Rakesh Goyal said budget is a good one. He said the decrease in import duty will cause cost- reduction and the textile industry will be benefited.
The excise duty on man made fiber has been reduced from 16 to 8% custom duty has been reduced from 15 to 10% and import duty on raw material has been reduced from 15 to 10 percent The net duty on yarn will be lesser. The weaver will be benefited and prices of fabrics will decrease. So the customers will also be benefited.
He said the zero duty option can be adopted. The finance minister should search the way for this. He said the budget will be useful for textile producers.
The President of Textile Committee, Narayan Parikh has praised the budget. He said handloom cluster scheme has been enhanced from 20 to 100. Handloom yarn depots will be made. Handloom mark will be essential now. Duty upon man made fiber has been reduced. These are good steps for textile industry.
He said that man made fiber was going out of competition till now; but the Finance Minister has reduced the duty upon it. Now its prices will decrease and it will now be easy for us to compete internationally; consequently Indian textile export will gradually increase.
Director of Bansbara Synthetics and MD of S.R.T.P.C- Mr. R.L. Toshniwal praised the budget. He thanked the finance minister to produce a beneficial budget for textile industry. He said that the investment will increase owing to the implementation of cluster scheme, and it will certainly play an important role in the development of textile industry. Mr. Tosniwal suggested that DIPB rate should have been reduced from 13.2% to 9.25% percent to boost the export.
He further said that the increase in Technology Upgradation Fund is praise worthy but not sufficient; because there is a great necessity of investment in textile industry. He said the funding of TUFS should be enhanced.
B.K.Patodia, the President of TEXPROCIL says that the budget is more or less according to the expectations of textile industry. The benefit which had earlier been given to the cotton yarn, has been given this time to man made fiber and yarn. Relaxation has been given in customs and excise duties. Import duty has been reduced on raw materials. These are the signs.
Mr. Patodia said that the amount of TUFS has been increased from 435 to 535 crore; it was need of time. Import duty has been reduced on the import of machines; it will benefit the investors. He said that this budget will accelerate the rate of development in textile industry. The budget will be considered well and good budget.
CEO of Wellknown Polyester Mr. Ashok Gupta said that in prima-facie it appears that the excise duty on man made fiber has been reduced from 16 to 8% custom duty has been reduced from 15 to 10% and import duty on raw material has been reduced from 15 to 10 percent; but as a matter of fact it does not make any significant difference to the textile Industry.
The finance minister just portray that he stands with the textile industry but he is really not.
Ramesh Jain, MD of Bhilosa Industries says this budget is not good enough for textile industry but not even so bad for it.
He says the ultimate price effect will be more or less the same as earlier.
He said that earlier, accumulation took place at p-o-y level; now it will take place at fabricators level. The collection will remain the same. There will not be a major change in situation. Even in growth, there will not be any change.
Mr. Jain said that in this budget these is nothing like that which will give incentive to textile industry but after all it will be said a good budget.
Bajrang Biyani, President of All India Small Scale Garment Association, said that the budget is normal. Textile industry will not have any major benefit of it. Textile industry had great expectations from the budget; but no such miracle was observed in this budget.
According to Mr. Biyani, the amount of TUFS has been increased; customs and excise duties have been reduced on yarn; it is good but not enough.
He said that since last few years the textile industry is passing through many problems. There are many challenges before it. If we see with that vision the troubles have not been diminished. He said that the increase in service tax will further increase the troubles of traders.
Chief executive officer of Mafatlal Industries, Prem Malik said that budget is good for textile industry. He said that it is a positive step that excise and custom duties have been reduced on yarn. Import duty has been reduced on raw materials. Malik says that the amount of TUFS has been increased; it is also a good step.
He also praised the increase in funding of textile parks. He pointed out that a reform in labour policy is the need of time for textile industry; which was not touched in the budget.
Mr. Malik said that restructuring of duty structure is essential to give incentive to the export; but accepted that the budget will be considered well and good budget.
Vice president of Hindustan Chambers of Commerce, Shankar Kejriwal said that budget is a normal budget. He said that the budget is not according to the expectation of textile trader’s community.
He said that the reduction of customs and excise duties on all man made fiber and yarn, the reduction of import duty on machinery are the positive steps.
He, however, said that no relief has been given in DTS and the range of service tax has been widened, this is disappointing.