FICCI seeks rationalisation of duty for MMF

03 Aug '15

5 min read

Even as the new Textile Policy is being worked upon, apex industry body FICCI has urged finance minister Arun Jaitley to rationalise duty on man-made fibre (MMF), provide export finance at seven per cent interest, adequate allocation of funds under TUFS, and consider term loans already sanctioned under the existing TUFS instead of the proposed new TUFS.

The Textiles Committee of the Federation of Indian Chambers of Commerce and Industry (FICCI) that met the Union minister suggested that excise duty on MMF be brought down to 8 per cent from the current 12 per cent to stimulate growth of the industry by attracting investments. It said that the current year allocation of Rs 1,520 crore under TUFS is “grossly inadequate” and it should be increased three-fold to Rs 5,000 crore.

In a presentation to the finance minister, the FICCI Textiles Committee led by Ginni Filaments’ Shishir Jaipuria, also chairman of the committee, said excise duty on MMF should be reduced to 8 per cent to decrease the huge gap between MMF and cotton. “The revenue loss on this account would be made up with increased consumption as witnessed in 2008-09 when the excise duty on man-made fibres was 4 per cent,” the committee said in its presentation.

Reduction in excise duty on MMF will further help the downstream industry, especially weavers at Surat, Bhiwandi and Bhilwara who have been going through tough times as the excise duty paid on MMF cannot be Cenvated because the value chain breaks at the yarn/fabric stage.

In this context, the committee said that the textiles value chain in India bears differential tax treatment whereas there is no distinction globally between cotton and MMF. The levy of different rates has created needless distortions. In India, while excise duty on natural fibres like cotton, wool and flax is nil, that imposed on man-made fibre, filament and yarn attract as high as 12.5 per cent.

Countries like China, Pakistan, Sri Lanka, Indonesia and Thailand follow fibre neutral policy i.e. the duty on cotton/cotton yarn and MMF/MMF yarn textiles are imposed at the same level. The global fibre consumption trend in future is likely to further tilt in favour of MMF.

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