The Hindu Business Line : Large textile players seek status quo on Cenvat chain

The Minister for Textiles, Mr Shankersinh Vaghela, with Mr O.P. Lohia, Managing Director, Indo Rama Synthetics Ltd, and Mr Onkar S. Kanwar, Senior Vice-President, FICCI, during an interactive session in the Capital on Tuesday.— Ramesh Sharma

New Delhi , June 15

THE organised players in the textile industry are a worried lot. With rumours gaining ground here that the Finance Minister, Mr P. Chidambaram, might soon pronounce a shift in policy stance on the unbroken Cenvat chain, the larger players in the industry have intensified pressure on the Union Textiles Minister to maintain status quo on the issue.

On the other hand, various weaver bodies have already reiterated their demands to the ruling coalition for doing away with the Cenvat duty.

Some of the weavers have also been demanding the reintroduction of optional excise duty scheme, which was earlier available for the sector.

The Union Textile Minister, Mr Shankersinh Vaghela, was expected to meet the Finance Minister, Mr P. Chidambaram, here in a day or two on the Cenvat issue, a Government official said.

When asked what position the Textiles Ministry would take on the demands for breaking the Cenvat chain, Mr Vaghela came with a guarded response on the matter.

"We have received representation from a section of the textile industry seeking Cenvat exemption. There are also others who do not want the chain to be broken. We are analysing the issue threadbare before giving our view point to the Finance Minister," Mr Vaghela told presspersons on Tuesday on the sidelines of a FICCI interactive session on textiles.

Indications are that the Textile Ministry may not be in favour of tinkering or breaking the Cenvat chain.

After much persuasion from the organised industry, the NDA Government had in the Budget 2003-04 introduced the unbroken Cenvat chain.

The proponents of the chain were members of the industry chambers such as the Federation of Indian Chambers of Commerce and Industry and the Indian Cotton Mills Federation.

Soon after the UPA Government assumed office at the Centre, the Minister of State for Commerce and Industry, Mr E.V.K. Elangovan, had promised that, in line with the poll promises of his party, the Government would soon initiate measures to do away with Cenvat duty.

At the interactive session here , the Textiles Secretary, Mr S.B. Mohapatra, however held that protection of inefficient segments would not be in the long-term interest of the sector.

"India has the capacity to match China if right policies are formulated and big textile complexes are developed. We must think big. This cannot be achieved by protecting small and inefficient segments," Mr Mohapatra said.

The Chairman of the FICCI Task Force on Textiles, Mr O.P. Lohia, said that an unbroken Cenvat chain was in the overall interest of the textile industry.

"The uncertainty surrounding the continuation of Cenvat chain has already impacted the industry. Over the last 15 days, movement of material has stopped. Some of them are looking at cutting production," Mr Lohia told the Textile Minister.

When asked about the growth prospects for textile exports in the coming years, Mr Vaghela said that he expected textile and clothing exports to double by the end of 2006. India's textile and clothing exports stood at about $13 billion last year.