Interviews
FICCI seeks special package for textile industry
10 Nov '08
4 min read
Expressing deep concern over the steep decline in the profitability and investment in the Indian textile industry, FICCI has immediately sought a 'SPECIAL TEXTILES PACKAGE' for the industry to face the current economic crisis.
FICCI noted that profitability of Indian textile industry fell by over 99% in June 2008 quarter and investment in the current year (for April-July) has been less than one third of last year for the same period.
FICCI also said that competing countries are also bailing-out their textiles industry in the midst of these crises and in fact Pakistan Government has only last week approved the incentive package for its textile industry.
Under 'Special Textiles Package' FICCI has demanded, among other things, Moratorium for one year on term loans for textile industry; Increased drawback rates; Export credit at international rates; Extension of Sunset Clause for EOUs for 5 years; Release of Pending Funds of last year under TUFS; Reduction of Excise duty on man-made fibres; 10% Import duty on Man-made fibres; and 7% Duty Free Scrips as a refund of State taxes.
FICCI emphasised that unless these steps/measures are implemented swiftly to bail-out the Indian textiles industry, these is a risk of large scale lay-offs in the industry.
Pointing out the employment intensive nature of the industry, FICCI said that for every 1 unit of capital in textiles industry 7 people are employed whereas, in case of steel and auto sector only 1 and 2 people are employed respectively for every unit of capital. So diminishing investment in the textile sector could have significant impact on the employment front.
FICCI said that under the 'Special Package' Government should provide a moratorium of one year for repayment of principal amount of term loans taken by textile industry. For this there is no need for brining any change in the Act or rules by RBI and financial institutions only need to be advised to restructure their loan portfolios accordingly.
Further, FICCI noted that Drawback rates have been reduced by 1 to 3% for textile products with effect from 1st September 2008. Whereas, the input cost for the industry has substantially gone up in the last few months.
Therefore, FICCI said that these drawback rates need to be increased to their levels that were existing prior to 1st September 2008.
The Chamber also demanded that Sunset Clause for EOUs should be extended for another 5 years at least. Under this Clause, EOUs are entitled for income tax exemptions under Section 10 B of Income Tax Act for a period of 10 years that is expiring by March 2009.
Given the profitability position of textile industry currently, it would not be appropriate to withdraw this benefit next year as a result of which tax for EOUs would be around 34% after March 2009, FICCI pointed-out. Also, Indian textile exporters need to get export credit at international rates as is the case incompeting countries.
FICCI noted that profitability of Indian textile industry fell by over 99% in June 2008 quarter and investment in the current year (for April-July) has been less than one third of last year for the same period.
FICCI also said that competing countries are also bailing-out their textiles industry in the midst of these crises and in fact Pakistan Government has only last week approved the incentive package for its textile industry.
Under 'Special Textiles Package' FICCI has demanded, among other things, Moratorium for one year on term loans for textile industry; Increased drawback rates; Export credit at international rates; Extension of Sunset Clause for EOUs for 5 years; Release of Pending Funds of last year under TUFS; Reduction of Excise duty on man-made fibres; 10% Import duty on Man-made fibres; and 7% Duty Free Scrips as a refund of State taxes.
FICCI emphasised that unless these steps/measures are implemented swiftly to bail-out the Indian textiles industry, these is a risk of large scale lay-offs in the industry.
Pointing out the employment intensive nature of the industry, FICCI said that for every 1 unit of capital in textiles industry 7 people are employed whereas, in case of steel and auto sector only 1 and 2 people are employed respectively for every unit of capital. So diminishing investment in the textile sector could have significant impact on the employment front.
FICCI said that under the 'Special Package' Government should provide a moratorium of one year for repayment of principal amount of term loans taken by textile industry. For this there is no need for brining any change in the Act or rules by RBI and financial institutions only need to be advised to restructure their loan portfolios accordingly.
Further, FICCI noted that Drawback rates have been reduced by 1 to 3% for textile products with effect from 1st September 2008. Whereas, the input cost for the industry has substantially gone up in the last few months.
Therefore, FICCI said that these drawback rates need to be increased to their levels that were existing prior to 1st September 2008.
The Chamber also demanded that Sunset Clause for EOUs should be extended for another 5 years at least. Under this Clause, EOUs are entitled for income tax exemptions under Section 10 B of Income Tax Act for a period of 10 years that is expiring by March 2009.
Given the profitability position of textile industry currently, it would not be appropriate to withdraw this benefit next year as a result of which tax for EOUs would be around 34% after March 2009, FICCI pointed-out. Also, Indian textile exporters need to get export credit at international rates as is the case incompeting countries.
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