Textile industry expects bailout from stimulus package-II

Written by Shaheen Mansuri | Updated: Dec 30 2008, 05:49am hrs
Indias textile sector is high on hopes of getting financial bailout from the second stimulus package to be announced by the government this week.

The sector, which has seen a sharp decline of 30% in its expected export target at Rs 25,000 crore for the current fiscal, wants an interest subvention of 4% from the existing 2%, amongst others.

Says Amit Goyal, president, Confederation of Indian Apparel Exporters (CIAe), We have requested the ministry to grant a moratorium period of three years before the textile players start paying their interest on loans taken from banks to meet their financial needs. If the flexibility of granting a pause before the interest payment is not granted, the fraternity will default on their payments.

He further said, We have also demanded duty drawback rates to be increased from the current 8.5% to 14.5% and certain income tax benefits so that the sectors financial health improves.

In addition to the interest subventions and tax benefits, textile minister, Shankar Sinh Vaghela has also asked the ministry for a Rs 2,600-crore package to help handloom cooperatives. The package includes a waiver of loans for handloom cooperatives and loans at concessional interest rate of 7%.

It may be recalled that the sector, which is labour intensive, did not have much financial relief in the stimulus package for the economy announced by the government on December 7.

The government had announced a bailout package of Rs 1,400 crore and an interest subvention of 2% till March 2009 which had upset the players.

Meanwhile, Vineet Nigam, a senior analyst at rating agency ICRA says, High inflation rate and slow industrial growth have been undermining the actual potential of the textile sector.

If tax benefits are not granted by the government, there will be a further dip in exports.