The textile sector, with fingers crossed, is waiting for a favourable Budget 2008. The industry is hoping that the finance minister will announce reduction in excise duty on textiles and revision of loan repayment terms.
According to sources in the government, the finance ministry is likely to consider proposals on reduction of basic excise duty (BED) on textile machinery and equipment to eight per cent from the existing 16 per cent.
The move forms part of the government’s twin strategy to meet the sector’s immediate requirements and simultaneously strengthen the domestic textile industry, which is expanding capacities rapidly to capture an international textile and clothing market worth $110 billion by 2012.
“Imports are less than two per cent of domestic production, and it’s mostly of extra-long staple cotton that does not compete with domestic production. With increase in production and improvement in the quality of domestic cotton, import of cotton will now be only in the segments where domestic production is insufficient and, therefore, imports will not offer competition to domestic cotton. Therefore, the present level of 10 per cent basic customs duty only results in eroding the price competitiveness of the cotton textile value chain,” said DK Nair, director-general, Confederation of Indian Textile Industry.
Besides, the government is also considering options like bringing down import duty on textile machinery to a uniform level of five per cent, to boost manufacturing activity in the sector.
Moreover, sources added that the government might restore the total excise duty exemption on crucial textile machinery that was withdrawn in Budget 2007.
Talks are on for reducing both excise and customs duties on furnace oil for captive consumption of the textile and clothing industry. There is also a possibility that the government will reduce import duty on long staple cotton to five per cent from ten per cent.