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Fiscal relief key concern for cotton textile industry

G. Gurumurthy

COIMBATORE, Feb. 21

BOGGED down under high operating costs and demand recession still haunting many, the cotton textile industry is looking to the Central Government more than ever before to come to its rescue.

Notwithstanding different sectors within the industry presenting contra-interests, if one thing on which the cotton textile industry appears to be making a common ground this time, it is on securing a reduction in the rate of basic excise duty from eight per cent to four per cent on cotton yarn.

The reasons to seek the excise rate cut cited by each sector may be varying, but the underlying factor for all of them pitching for the fiscal relief from the Centre only signifies that the high manufacturing costs and falling prices for their finished p roducts both in domestic market and exports have made the industry turn towards the Centre for resuscitation.

The Indian Cotton Mills Federation (ICMF), the apex national textile body and its key affiliate, the Southern India Mills Association (SIMA), whose members account for one third of the total spindleage and over 40 per cent of the country's yarn shipment, have demanded reduction in the basic excise duty for all cotton yarns to four per cent from the present rate of eight per cent.

Both the ICMF and SIMA, which remained strident all along seeking withdrawal of the excise duty exemption enjoyed by the SSI textile spinners on the basis that the duty exemption cut into the financial health of the duty paying mills, appear to have modi fied their tone now by asking duty reduction or as an alternative, exemption to all the cotton yarn manufacturers from the very payment of excise duty for a limited period of three years.

These bodies reason out that an across-the-board excise duty exemption for all cotton spun yarns for a limited period will help restore the financial health for a good part of the industry by then.

But the textile industry watchers feel that more than merely widening the excise duty exemption arena, the organised textile industry have put up this demand largely with a view to addressing the ticklish issue of rampant excise duty evasion going on in the textile sector thereby creating a level-playing field between those dodging the duty and those mills adhering to excise regime.

By demanding that such a duty exemption from the Government should be made available to `all cotton yarns', the apex body has sought to adequately cover the interests of those units which are producing hosiery cotton yarn as currently, the hosiery yarn i s exempted from excise duty.

The industry feels that the excise duty cut by half to four per cent will enable the units to partly offset the erosion in their margin and keep the bottomline.

However, it is still a moot point whether the Government, which had already gone about rationalising excise duty structure into the three broad slabs, will be acceding to the textile industry's demand to further lower the duty on cotton yarn below the m inimum floor rate of eight per cent.