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D&B Budget Impact Analysis: Textiles sector
Overall Impact: Positive
- Many of the wishes of
the industry have been satisfied in the current budget. The reduction in customs
duty on raw material and specified machineries for the textile sector will
provide some relief to the ailing industry, besides preparing them for post
QR regime.
- Budgetary provision under
the Technology Upgradation Fund Scheme (TUFS) has been raised from Rs 500
mn to Rs 2,000 mn.
Budget Allocation
- The budgetary allocation
to Ministry of Textiles has been enhanced from Rs 4.57 bn in 2000-01 to Rs
6.5 bn in FY 2001-02 and provision for Cotton Technology Mission is increased
from Rs 150 mn to Rs 250 mn.
- The FM expects that at
least 50,000 new shuttleless looms will be installed and 25,0000 plain looms
will be modernized to automatic looms by year 2004 through funding from the
TUFS. Accelerated depreciation at the rate of 50% on plants and machinery
purchased under the TUFS has been allowed. This will help the ailing textile
machinery manufacturers come out of red. However, basic customs duty on specified
textile machines (including shuttle-less looms) has been reduced from 15%
to 5%. This may be a cause of concern for domestic machinery manufacturers.
- The FM has set aside
Rs 100 mn for 2001-02 to set up integrated Apparel Parks. However, the current
exemption of excise on garments sold under the registered trade name has been
abolished and an excise duty of 16% of MRP has been imposed on such garments.
Excise Duty
- Capacity based compounded
levy on independent textile processors has been withdrawn. They shall now
have to pay duty (Cenvat +AED) of 16% ad valorem. The independent processors
will be allowed to take credit of the duty paid on inputs on a deemed basis
at 25% on cotton fabrics and 45% on other fabrics. For composite mills the
rate of deemed credit is 20% on cotton fabrics and 40% on other fabrics.
- This reversal of ad valorem
duty has come as a shot-in-the-arm to the small and medium processors that
were plagued by the reduced activity in the sector. Benefiting most form this
move are the independent cotton processors who have been complaining of high
per meter excise rate due to the slow processing nature of the industry.
- Excise duty exemption
availed by SSI units has been withdrawn in case of cotton yarn and ball/roller
bearings. Thus excise duty exemption up to Rs 10 mn will not be applicable
to these units.
Customs
Duty
- Customs duty on DMT,
PTA, MEG and Caprolactum has been reduced from 25% to 20%. This is the WTO
bound rate for synthetic fibers and yarns. Customs duty on polyester chips
and nylon chips for the manufacture of fibers and yarns has been reduced from
35% to 25% and on silk waste, cotton waste and flax fibre from 35%/25% to
15%.
Rediff-Dun & Bradstreet Budget Impact Analysis
Budget 2001
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