The Hindu Business Line : Man-made fibre industry for neutral fiscal policy

The man-made fibre industry wants the Union Government to remove discrimination in fiscal dispensation between man-made fibres and cotton fibres so that India can achieve correction in its fibre mix to take advantage of the global opportunities in textile exports.

At present in India, cotton constitutes 80 per cent of total fibre usage leaving the man-made fibres to fill the rest; whereas in global market it is 60 per cent man-made and 40 per cent cotton.

The continuing fiscal policy discrimination against the man-made fibre industry has resulted in decline in consumption leading to steady rise in import, according to textile industry sources.

The sources pointed out that consumption of polyester staple fibre (PSF) and partially oriented yarn (POY) among the domestic textile manufacturing sector had remained stagnant at 2.1/2.2 million tonnes for the past few years as against the installed capacity of three mt in the country.

Consumption of man-made fibres in 2005-06 in fact fell marginally (0.43 per cent ) to 2.1 mt compared with a 22 per cent rise at 4.21 mt in 2004-05.

Man-made fibre imports into the country during the same period had shown a staggering 28 per cent rise at $1,613 million. One of the strong reasons for this is the distorted exemption given for cotton textiles from the Cenvat duty, the sources said.

Stating that a fibre neutral fiscal policy should be given a push to correct the situation, the sources also said that such an approach would do good for the entire textile sector. This is because ifIndia had to meet its target of achieving $40-billion exports by 2010, it had to raise the share of man-made fibres.

They argued that with the available land area for cotton unlikely to go up significantly over the next three years, it will be difficult to achieve rise in demand from the present 4.2 mt to the projected 8.1 mt by 2010.

However, PSF and POY capacities could be increased immediately but to fulfil this task, the Government should end the discrimination in fiscal duty regime existing between cotton fibres and man-made fibres and even between synthetic fibres.

This is because the present system of duty protection extended to polyester intermediate manufacturers instead of giving it to the fibre/yarn sectors is inhibiting investments in downstream industries where there is huge job potential, the industry sources said.

They strongly favoured lowering the excise duty for man-made fibre-based yarns/fabrics and garments at 4 per cent as is being given to cotton and the basic customs duty at 10 per cent.