The Budget has several positive features for the textiles sector. Restoring the optional duty regime for branded garments and made-ups has been a demand that the industry has been raising for three years; it has now been incorporated in the Budget proposals. Continuation of the hugely successful technology upgradation fund scheme (TUFS) during the 12th Plan and making a reasonable allocation of R2,400 crore for the scheme for the next fiscal would provide the necessary impetus for capacity building in this sector. After some years of decline, the textile sector is currently witnessing some growth and the industry needs this vital assistance for cashing in on the present demand recovery in the domestic as well as overseas markets. In this context, the target of R151,000 crore that the Budget envisages for investment under TUFS during the 12th Plan period is surely achievable.
The reduction of the customs duty for textile machinery from 7.5% to 5% and providing R50 crore of additional funding for apparel parks are among the other welcome features of the Budget that would help investments in this sector.
The processing sector in the textile industry has been facing serious environmental problems and this has been retarding the growth of the entire sector, especially home textiles and garments which are the end products in the textile chain. Launching a new integrated processing development scheme as proposed in the Budget would address this issue to a considerable extent.
Reduction of interest rates both on working capital and term loans for the handloom sector to 6% will be of immense help to this vulnerable sub-sector of the industry. If this rate was also extended to working capital for purchase of cotton by the textiles sector, this would have helped both the industry and cotton farmers. The industry has been making this demand for several years now in the context of increasing interest burden that erodes its cost competitiveness.
Another important issue that the Budget has not addressed is the duty burden on man-made fibres. The industry is unable to cash in on the huge demand available in global markets for man-made fibre-based textile products because of the high incidence of excise and customs duties that also push up domestic fibre prices. Man-made fibres also form the bulk of raw materials required by the highly potential technical textile sub-sector of this industry.
The textiles industry had requested the finance minister to avoid the introduction of commodity transaction tax in the context of cotton trading. Though CTT has been introduced in the Budget, agricultural products have been kept outside its purview and, therefore, cotton exchanges stand exempted.