Slew of incentives for textile sector

Textile sector has emerged as one of the biggest gainers from Union Budget 2012-13.

A host of incentives for the sector include:- proposal to set up mega clusters; Rs 500-crore scheme for promotion and application of geo-textiles in the North-East; Rs 5,000-crore Venture Fund with SIDBI to enhance availability of equity to the MSME sector; and full exemption to automatic shuttle-less looms from 5 per cent basic customs to modernise the weaving sector.

The other sops include:- duty retention of existing concessional rate of 5 per cent basic customs duty to new textile machinery; and weighted deduction at 150 per cent of expenditure incurred on skill development.

Pointing out that the textiles segment was the largest employment provider after the agriculture sector, the Union Textiles Minister Mr Anand Sharma said all these steps will help in technology upgradation, value addition and job generation in the textiles sector.

Mr A Sakthivel, President, Tirupur Exporters Association, told Business Line that the sector welcomes all these measures but was concerned about a small cut in the excise duty payment on branded garments. He said the excise duty would now be charged at 30 per cent of the retail sale price against the existing 45 per cent, though the industry had requested for full excise duty exemptions on branded garments.

Mr Sakthivel also said since the service tax has been increased to 12 per cent (from 10 per cent) and more services have been included in the tax net, the Finance Ministry should increase the service tax refund given to knitwear exporting units from the existing 0.15 per cent to 1.5 per cent of the total Free On Board value of exports. This was required to offset the increase in service tax rate, he said.

Boost For Textiles:

- Two mega clusters (in Andhra Pradesh and Jharkhand)

- Dormitories for women workers in the mega clusters of handloom and powerloom

- 3 Weavers’ Service Centres (one each in Mizoram, Nagaland and Jharkhand) to provide technical support to poor handloom weavers.

- Rs 500 cr pilot scheme for promotion of Geo-textiles in the North East

- Rs 70 cr powerloom mega cluster in Ichalkaranji in Maharashtra to help local artisans and weavers

- Rs 5,000 cr Venture Fund with SIDBI to enhance availability of equity to MSME sector

- Weighted deduction at 150% of expenditure incurred on skill development in manufacturing sector to overcome shortage of skilled manpower

- To modernise weaving sector, full exemption to automatic shuttle-less looms from 5% basic customs duty

- Full exemption from basic duty to automatic silk reeling and processing machinery and its parts

- Retention of existing concessional rate of 5% basic customs duty to new textile machinery; Second-hand machinery to attract 7.5% basic duty

- Basic customs duty on wool waste and wool tops reduced from 15% to 5%

- Full exemption from basic customs duty to aramid yarn and fabric used for the manufacture of bullet proof helmets

- 10% excise duty applicable to branded ready-made garments with abatement of 55% from the Retail Sale Price. Along with increase in duty to 12%, abatement enhanced to 70% (As a result, the incidence of duty as a percentage of the Retail Sale Price would come down from 4.5% to 3.6%)

- Extension of weighted deduction of 200% for R&D expenditure in an in-house facility beyond March 31, 2012 for another 5 years to promote investment in R&D.

Mr S.V. Arumugam, Chairman, Confederation of Indian Textile Industry (CITI), said while CITI had requested for removal or reduction of excise duty for man-made fibres, the duty has gone up from 10 per cent to 12 per cent. He said though the hike is a part of increase in the standard rate itself, it would make the man-made fibres of India less competitive compared to the competing countries. 

Noting that the Budget has no reference to the Technology Upgradation Fund Scheme (TUFS), he hoped that a separate announcement would be made by the Government for extending TUFS to the 12th Five Year Plan.