Incentives to improve cotton production to keep prices competitive

28 Feb '07

4 min read

Harish Cherukuri, Managing Director of Priyadarshini Spinning Mills Limited (PSML) on Union Budget 2007-2008.

No significant change in policy from the last year's budget.

What are the changes that you would like to make in your industry?

Implementation of VAT through out the country and elimination of CST would save the industry money that is lost due to double taxation (in our case it is roughly 3%). The CST has of course been reduced to 3% from the current 4%.

Incentives to improve cotton productivity and production will help in keeping the raw material prices of the Indian Industry competitive with the rest of the world where the farmers are subsidized heavily.

How will India fare globally with this budget? As TUFS has been extended, the investments in the textile segment will continue and increase in the scale of operations will enhance the competitive edge of our industry.

Budget Announced by Mr.Chidambram:-
* 26 Integrated Textile Parks have been approved so far out of 30 sanctioned

A positive sign. This will encourage cluster development which will help in reducing lead time and increase utilization of assets. Over all, will help the companies in a cluster to become more competitive.

* Provision for Integrated Textiles Parks up from Rs.189 crore in 2006-07 to Rs.425 crore in 2007-08

Same as above

* Technology Upgradation Fund (TUF) scheme will be continued during the Eleventh Plan

As TUFS has been extended, the investments in the textile segment will continue and increase in the scale of operations will enhance the competitive edge of our industry.

* Against a provision of Rs.535 crore in 2006-07, I propose to provide Rs.911 crore in 2007-08

Many companies including ours have been waiting for long time for the refund of interest amount from the banks under the TUFS scheme. This is because the last year's allocation of Rs535 Crores was insufficient. Though there is an increase in this year for the same to Rs911 Crores, this may also prove to be insufficient.

* As before, handlooms will be covered under the TUF scheme
* A cluster approach for the development of the handloom sector was introduced in 2005-06 and 120 clusters have been selected

A positive sign. It will help the handloom sector to organize themselves into a more efficient body.

* 273 new yarn depots have been opened in the current year and the Handloom Mark was launched

* An additional 100-150 clusters proposed in 2007-08

Positive sign.

* 12 schemes that are now implemented will be grouped into five schemes in the Eleventh Plan period

* Health insurance scheme has so far covered 300,000 weavers and will be extended to more weavers to include ancillary workers

Positive sign.

* Outstanding credit to the SME sector increased from Rs.135,200 crore at end December 2005 to Rs.173,460 crore at end December 2006

* Banks encouraged to lend more to SMEs

Good Sign.

* Advise: Banks to have regard to the credit rating acquired by an SME while fixing the interest rate SME sector

Insistence of credit rating increases paperwork for the small enterprises. Credit rating is based on your past performance, but loans have to be given based on the proposed project and future projections taking into account the company's capabilities to execute which only a local officer will be able to judge.

* scheme for the modernisation and technology upgradation of the coir industry

* Provision of Rs.22.50 crore for coir particularly for the States of Kerala, Karnataka, Tamil Nadu, Andhra Pradesh and Orissa

* Merchandise exports crossed the milestone of US$100 billion in 2005-06

* expected to cross another milestone of US$125 billion by the end of the current fiscal

* CST rate will be reduced from 4 per cent to 3 per cent with effect from April 1, 2007

Implementation of VAT through out the country and elimination of CST would save the industry money that is lost due to double taxation (in our case it is roughly 3%). The CST has of course been reduced to 3% from the current 4%.

* Import duties on capital goods, project imports, metals and specified inorganic chemicals were reduced by 2.5 percentage points and, in some cases, by 5 percentage points

Positive sign.

* Peak rate for non-agricultural products brought down from 12.5 per cent to 10 per cent

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