The appointment of Dayanidhi Maran as Union Minister for Textiles, India has raised lot of optimism among the industry following his excellent track record as the Minister of Information and Technology in the previous government. It is hoped that the new minister will be able to guide this important and economically beneficial sector to help weather the current crisis it is facing for the past several months.

Fibre2fashion as always, took the initiative to speak to industry leaders across the entire gamut of the value chain; from petrochemical to garment manufacturing companies, to give an idea and bring forth to our readers, the expectations the sector has laid at the door steps of the new textile minister to revitalise the sector, which is going through a very depressing phase.

IndoRama Synthetics India Ltd:

Inverted excise duty structure on Mono Ethylene Glycol (MEG) and other items of raw materials and consumables: The problem of inverted duty continues to the detriment of the sector. Excise duty on MEG and other raw materials and consumables @ 8 % is much higher compared to the duty on finished goods; i.e. fibers and yarns @ 4 %. This scenario continues to generate unsalvageable CENVAT accumulation on a daily basis creating cash flow and liquidity problems. The matter needs to be resolved immediately by bringing parity of duty on raw materials and finished goods.

Pending CENVAT accumulation of the Industry: Huge amounts of blocked funds in the form of un-realizable credits are lying in the PLA accounts of the manufacturing units. The problem is more severe for units who made investments to upgrade technology and enhance capacities. Needless to mention this puts extreme strain on our financial health. Government needs to tailor out a mechanism to reimburse these funds to the industry.

Since in the past, the excise duty structure on Synthetic Fiber chain was not reduced simultaneously, it has created an inverted duty structure which has resulted in accumulation of over Rs.1500 crores of cenvat for the Synthetic Fiber chain. Over Rs.800 crores of cenvat accumulation is with the Synthetic Fiber producers while another Rs.700 cores is with the downstream users of Synthetic Fibers and Filament Yarns. It needs to be noted that wherever the duty on raw material is more than the duty on finished product, the same cannot be modvated and such un-modvated portion continues to accumulate.

On imported capital goods procured for expansion/diversification, besides Customs, CVD and SAD are also leviable. These besides the service tax component supplement the already burgeoning CENVAT account. As such, substantial amounts go into the system without any exit mechanism by way of utilization. These funds so stuck up is neither a revenue for the government because it is to be modvated/refunded, nor it can be used by the industry, which suffers in its day-to-day working for such huge cash outflow.

To overcome the problem, it is imperative to rationalize duties by having duty structure of raw material lower than the finished product or at least at par with the later, as also providing a mechanism of refunding of credit accumulated in CENVAT account in cases of inversion, within a stipulated time frame, to help in improving the cash flow position of the units for their day-to-day working. Alternatively, Government can introduce an excise certification / exemption system where the manufacturer should be allowed to procure his inputs without payment of duty to the extent of cenvat accumulation in the books of account.

Customs Duty on Purified Terephthalic Acid (PTA) and Mono Ethylene Glycol (MEG) in neighboring countries like Thailand, Indonesia and Pakistan is ZERO. To ensure availability of raw materials and finished products at competitive prices in line with neighboring countries CUSTOMS DUTY on PTA and MEG should be brought down to ZERO.