The Hindu Business Line : Powerloom weavers seek lowering customs duty on raw cotton

THE Powerloom Development and Export Promotion Council (PDEXCIL), the facilitation body for the decentralised powerloom weavers, has asked the Finance Ministry to lower the customs duty levels on raw cotton and cotton yarn to ensure that the prices of these raw materials for the domestic cotton textile manufacturing industry are saved from sharp fluctuations.

The council, which has come out its pre-Budget suggestions on fiscal duties to the Centre, has noted that though the cotton yarn price has tended to rule low now due to the increased raw cotton production in the current year, there has been instability in the yarn prices. This had came to surface in the previous year too when the yarn price went up to the extent of 50 per cent and the yarn price surged then due to increased export of raw cotton allowed.

The council, which maintained that raw cotton/cotton yarn formed the very basis of the competitiveness of the textile industries and account for over 60 per cent of their production cost, has said that in order to stabilise the prices of these raw materials, it was necessary that the present customs duty rate of 20 per cent on cotton yarn and the10 per cent import duty on raw cotton be both brought down to 5 per cent. This measure would ensure availability of yarn at a steady level thereby preventing any wild fluctuation in the yarn prices.

The council has also urged the Finance Ministry to reduce the excise duty on man-made fibre and other fibre yarns from the present Cenvat duty rate of 24 per cent. While the polyester filament yarn including polyester textured yarns and twisted, folded or cabled polyester filament yarn, the current Cenvat duty is fixed at 24 per cent, whereas in respect of the other synthetic and artificial filament yarns and mono-filaments including textured yarn, the excise duty is kept at 16 per cent.

Unlike the cotton sector, the optional excise duty route is also not available to the synthetic yarn manufacturers. In this scenario, the prices of these yarns are ruling high in the market, thereby increasing the cost of production for those using synthetic yarns. It is highly desirable that the peak excise duty levels of 24 per cent and 16 per cent be brought down to 12 per cent and 8 per cent, respectively, the council has suggested.

It has also underlined the need to have a relook on the withdrawal of income-tax benefit allowed earlier to exporters under the Section 80 HHC in the form of exemption on export profits which stands withdrawn since last fiscal and likewise, it also pleaded that the premium realised from the sale/transfer of the duty entitlement pass-book (DEPB) be exempted from income tax.

While the DEPB for exporters are allowed under the Foreign Trade (Development and Regulation) Act, the IT department has been initiating action for recovery of income tax on the premium earned on transfers of DEPB under Section 28(iii)(a). A suitable amendment in the above Section of the IT Act with retrospective effect be made to enable the exporters enjoy the IT benefit under 80HHC which will cover the past cases too.

The council has also drawn the attention of the Finance Ministry on the denial of the excise duty exemption on the diesel used for captive power plant for export manufacture by the textile units situated in the domestic tariff area; whereas the same facility is allowed for the 100 per cent export oriented units which are permitted to remove the diesel without payment excise duty. The domestic tariff unit engaged in export production is not given the excise duty exemption on the fuel used for manufacture even though the fuel is procured against furnishing relevant annexure under Section 19(ii) of the Excise rules.

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