The budget is also expected to lower the protective customs duty of 35 per cent on polyester staple fibre and other major fibres to 20 per cent in accordance with the agreement with the European Union signed in December 1994. All these fibres are already under open general licence of the current export and import policy.

The new excise duty scheme for independent processors of fabrics produced in the decentralised powerloom sector may also be extended to the organised sector as demanded by it. The organised mill sector has been complaining that ad valorem rates of duty raise its processing cost of fabrics vis-a-vis the powerloom sector.

In addition, the list of machinery items which are allowed to be imported at zero duty under the export promotion capital goods (EPCG) scheme is likely to be enlarged in order to speed up technology upgradation in the industry.

The textile industry, in its pre-budget memorandum, had urged the government to lower the excise duty on cotton yarn in the backdrop of a serious recession gripping it as evidenced by a sharp decline of 190 million kg in the production of yarn in 1998-99.

The industry's contribution to the country's total cloth output which had been declining year after year over the past few years was expected to shrink further to just four per cent in 1999-2000, the memorandum had warned and added that the remaining share had been cornered by the powerloom, hosiery and handloom sectors.

Under the new excise duty scheme that took effect from December 16, 1999, the rate of levy will be Rs 1.5 lakh per stenter chamber per month in the case of fabrics of average value not exceeding Rs 30 per square metre. The rate will be Rs 2 lakh per stenter chamber per month in cases where the average value of processed fabrics exceeds Rs 30 per square metre.