INDIA: Customs and excise duty cuts wanted

In a memorandum to Finance Minister P. Chidambaram, Confederation of Indian Textile Industry (CITI) Chairman P.D. Patodia has demanded reduction in excise and customs duties. The steep and fast appreciation of the rupee against the US dollar has hit the Indian textile and clothing industry, which is now demanding a reduction in excise and customs duties ahead of India's budget for 2008-09. Run-up to Budget 2008-09, these concessions were necessary to ensure sustained development of this crucial industry and its exports.

For the man-made staple fibres and filaments, CITI has sought reduction in customs duty to 5 per cent and abolishing an additional customs duty (ACD) of 4 per cent.

"These are primary raw materials and higher cost at this stage has a cascading effect on the entire textile value chain. There are no vulnerable units producing these items and manufacturers' profitability is quite high, rendering irrelevant the need for undue protection through high customs duty," Patodia told IANS.

Woollen fibre is already free of ACD and the same facility may be extended to all fibres, he said.

Citing the same demand for cotton, Patodia said it was the largest used primary raw material in the textile industry, accounting for nearly 60 per cent of its fibre consumption.

The existing custom duties erode the price competitiveness of the entire cotton textile value chain, he said.

CITI also wants reduction of mandatory basic excise duty from the present 8 per cent to 4 per cent for manmade fibres and textiles, and clothing using manmade fibres, to prevent a cascading effect on the industry.

Seeking relief from customs duties on textile machinery, their components and spares and furnace oil, CITI has said the domestic production of spindles is quite high. Other textile machinery production in the country is insufficient and not of modern technology.

Patodia said that the government must permit import of textile machinery other than spindles till Indian domestic textile machinery industry can catch up in quantity and quality.

CITI also wants halving of basic excise duty from 16 per cent to 8 per cent for textile machinery not exempted from excise duty, to enable the Indian textile machinery industry to achieve healthy growth.

He pointed out that power costs in India are quite high, compelling the textile industry to use captive power generation using furnace oil. The prices of furnace oil have increased substantially making it an expensive proposition.

CITI wants withdrawal of customs duty on furnace oil for specific use by the captive power plants. CITI also wants reduction in excuse duty from 16 per cent to 8 per cent for furnace oil imports.

The other demands include restoring excise duty exemption for specified textile machines which was withdrawn last year; a yearlong moratorium on term loans to tide over the current crisis facing the industry; drawbacks on duties and levies, averaging to 6 per cent, levied by state and municipalities on exported products, and a ceiling of 12.5 per cent of bank prime lending rate to cater to the huge working capital needs of the industry.

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Added: February 20, 2008 Source: Agencies
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