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Sowmya Sundar

OVER the years, the Government has taken steps to rectify the anomalies in the duty structure and revitalise the textile sector, indirectly benefiting the textile machinery sector.

Duty structure

The duty on components and spares was brought on a par with machinery. Earlier, imports of components were charged at a higher rate compared to finished machinery

In another significant step forward, a number of items eligible for concessional import at 5 per cent and 10 per cent were exempted from Cenvat as well.

Investment incentives

The commissioning of the TUF, the recently announced debt-restructuring package and the extension of capital subsidy from 12 per cent to 20 per cent for investment in powerlooms are a few steps that reiterate the Government's commitment to revive the ailing sector.

Though the offtake under the TUF has been disappointing, a number of amendments and relaxations have been made thereafter, extending the purview of the scheme so as to benefit a larger population. .

The suggestion of the steering committee report to allow textile units in the organised sector to access external commercial borrowings (ECB) even for purchase of indigenous machinery is another move that would give Indian machinery manufacturers a competitive advantage.

Bank guarantee for ECB is given only for exporters and importers and, hence, they are not able to access external funds for purchasing internal machinery. This move would save costs for the manufacturer and the Government. Foreign currency loans are equivalent or lower than the cost of funds post interest subsidy under TUF.The three key issues— duty structure, concessional financial assistance and debt restructuring — have been addressed. The success would largely depend on the pace of implementation.

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