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Home / Knowledge / News / Textiles / 'Half hearted approach by Govt' - Mr Sunil Jain, NITMA

'Half hearted approach by Govt' - Mr Sunil Jain, NITMA

12
Dec '08

The Indian textile industry has been saddled with factors like steep hike in minimum support price for cotton resulting in high cotton price, hardening of bank interest rate, withdrawal in export incentives, high transport costs, acute power shortage, electricity duty charged by various State Governments for production of own power, poor off-take for textile products due to global recession, etc.

The various relief measures sought by the industry include restoration of interest subvention to 4%, restoration of duty drawback rates, two year moratorium for repayment of loans and avoid NPAs, relax banking norms, refund the Technology Up-gradation Fund (TUF) Scheme interest arrears (over one year backlog), exempt fuels meant for power generation from all taxes and levies (considering the acute power shortage which is likely to continue for another three to four years), etc.

The economic stimulus announced by Government has provided marginal relief to the textile industry. The Government has extended only half hearted approach to the urgent requirements of the industry, Shri Sunil Kumar Jain, President of Northern India Textile Mills Association (NITMA) said in a press statement. He stated that facilities extended to the sector are either by way of releasing withheld benefits or by way of restoring withdrawn benefits.

In the case of TUF and CST/TED payments, reimbursements which had been withheld for a long time will now get paid on the basis of the fund allocation provided in the Package. He said that 4% cut in the ad-valorem CENVAT rate across the board would help to reduce the cost of production. In the case of export credit, subvention of 4% had been withdrawn from October 2008 i.e. much earlier than original planned, out of which 2% has been restored now.

He added that 2% interest subvention on packing credits would give marginal relief while 4% is essential to compete in the global market and also considering the substantial increase made by Pakistan and China in the export incentives.

Shri Jain added that, some new facilities in the case of service tax have been extended to the sector. Increase in refund of service tax on agency commission from 2% to 10% will help textile units. Refund of post production service taxes to units availing drawback facility will also help the textile sector, he said.

Shri Jain stated that major requirements of the sector have not been covered in the Package. “Restoration of drawback rates, moratorium of two years for repayment of principal amounts against term loans in view of the working capital problems of this loss making industry, and the restoration of the remaining 2% of subvention for export credit is the major requirements that need immediate attention.” He added that the restored subvention should be made available from 1st October 2008, the date from which it had been withdrawn earlier.

Shri Jain pointed out that the serious problems of the cotton situation have not been even touched upon by the Government in the package. The Government has increased Minimum Support Price by more than 40% which have increased the domestic cotton prices by 20% above international prices. The margin money charged by banks for funding cotton purchases by mills may be reduced from the current 25% to 10%.

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