Textiles processing sector sees shades of pink

The announcement of reduction in customs duty on machinery, coupled with 10 per cent capital subsidy in the Union Budget has cheered the textile processing sector in the state.

With the reduction of customs duty, the processing houses in Gujarat are planning to procure second-hand imported machinery from abroad. There are over 350 processing houses in Surat alone, which accounts for a turnover exceeding Rs 1,000 crore.

"With the reduction in customs duty, the processing houses in the state can procure the second-hand imported machinery from abroad to reduce cost of production and be internationally competitive. The companies are availing the ministry's Technology Upgradation Fund (TUF) benefits to procure the second-hand imported machinery from variuos US and Eurpoean countries," Gautam Shah, chairman, textile council, CII, Gujarat told Business Standard on Tuesday.

The small and medium enterprises in the Indian textile industry are primarily decentralised, play an important role in the textile and clothing economy in the country. The predominance of the SMEs can be seen in the entire supply chain of the textile industry, cotton ginning and processing, weaving, processing and apparel manufacturing.

The government's TUF scheme will enable the small and medium textile units to modernise and upgrade their technology to be internationally competitive.

"At present, the Centre is giving five per cent interest reimbursement under TUF. There was a recommendation by the TUF committee, to hike this to eight per cent. Instead, the government has announced ten per cent capital subsidy for the processing industry. This is a welcome move, as it would benefit the processing industry on the whole, but the industry of Surat does not have much to gain from it," said Arun Jariwala, chairman, Surat Art Silk Cloth Manufacturers Association.

Small and unorganised textile manufacturers constitutes over 90 per cent of the Indian textile industry and were expected to be worst hit by competition after removal of quotas with effect from January 1, 2005, the 10 per cent capital subsidy for the processing sector will help to revive the ailing processing sector in Gujarat.

"Our assertion is in view of the fact that only continuous processing machines would be eligible to get this subsidy, and very few machines of this type are installed in Surat. However, the move by the centre might encourage some processors of Surat to install continuous processing machines," said Jariwala.

With Gujarat accounting for around 25 per cent of the Indian textile exports, the Budget has provided special incentives and reliefs to the textile sector. Gujarat holds a major share in the Indian textile exports and the incentives provided to the textile sector is expected to make the textile units of the state more efficient and competitve.

"At present, the textile industry has to pay 20 to 35 per cent customs duty on import of machinery. In our pre-budget memorandum, we had sought reduction of the duty to five per cent. We are glad that the finance minister has taken our plea into consideration to a certain extent, and reduced the duty to ten per cent. The reduced customs duty will enable more textile businessmen of Surat and India, to import good quality machinery. This would give a push to modernisation, which would allow the industry to compete at the global level," said Dinesh Mandalaywala, president, The Southern Gujarat Chamber of Commerce and Industry.

Gujarat in Budget 2005-06

Ahmedabad gets mega city status. Rs 150 crore grant for infrastructure development.

Ahmedabad will also receive Rs 1,600 crore grant if AMC provides viability project in time.

Surat, Vadodara and Rajkot to also receive special benefits, as they have a population of over 10 lakh.

State will benefit with creation of 1.2 crore new jobs in textile sector.

Pharma industry to benefit from sops to the industry. Most pharma companies are likely to avail of R&D corpus fund besides availing of the customs duty slash on pharma equipment.

Cluster development programme for handloom sector will benefit Surat industry.

Sops to food processing, IT industry, which are picking up in the state.

State's cloth processing industry to benefit with ten per cent capital subsidy on textile machinery.

State likely to benefit most under the proposed Rs 10,000 crore SPV scheme.

State to benefit under the insurance scheme for 20 lakh handloom weavers.