The Hindu Business Line : `Excise proposal on textile machinery a disincentive'

Coimbatore March 8 Textile industry is put to take a bitter pill through a budgetary proposal that has sought to withdraw the excise duty exemption on specified textile machinery granted in the previous budget.

The amended Central Excise notification while withdrawing the duty exemption granted for 2006-07 has now brought the list of specified textile machinery under 8 per cent excise rate, the textile industry sources said.

Specified textile machinery comprising 40 machines are largely used by the weaving, knitting, and processing/finishing sectors.

These are are yarn/fabric mercerising machine, continuous bleaching machine, compacting machine, hosiery yarn dyeing machine complete with kitchen accessories, computer colour matching equipment and computerised embroidery pattern making machines. The effluent treatment plant machinery including ultra-filtration, reverse osmosis and sludge dewatering equipment too will now attract the 8 per cent excise rate.

Hence, the textile industry is now worried on losing the advantage of having concessional import duty rate of 5 per cent for another set of specified machinery used by the spinning, weaving sectors.

The items covered under the 5 per cent customs duty, which include auto-cone winding equipment, humidification plant and drawing in machines, would now stand to attract an 8 per cent countervailing duty (in lieu of the central excise) to maintain parity between the applicable local and import duties, the industry sources said.

"The withdrawal of the `nil' excise rate for these specified machinery largely applied for value-addition will be a disincentive for those contemplating investments in value chain,'' said Mr S.V. Arumugam, Chairman of the Southern India Mills Association.

The industry had last year got excise duty exemption on specified machinery on the plea that weaving and processing sectors (including textile finishing) were in dire need of new investments to update technology.

The withdrawal of duty exemption and the countervailing duty burden along with the increased incidence of education cess would prove a dampener on the industry's efforts to draw new investments, the sources feel.

The representatives of textile industry have decided to take up the issue with the Centre for redressal.

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