Cenvat exemption move for powerlooms opposed

The textile industry in Gujarat has strongly opposed proposals to exempt the powerloom sector from the Cenvat (central value-added tax) system, stating that this will amount to unfair treatment of the organised sector and the integrated mills, besides encouraging malpractices.

Textile industry players said they have made a representation to the Union finance minister, P Chidambaram, against the possible Cenvat rollback, even as there were reports that political parties were pressing for a rollback of Cenvat in the powerloom industry.

"It would indeed be sad if Cenvat was rolled back for the powerloom sector. Last year, after much deliberations and discussions, the powerloom industry, handloom industry and the integrated mills agreed jointly to have Cenvat implemented across the textile industry," said Sanjay Lalbhai, managing director, Arvind Mills.

Lalbhai was speaking at a panel discussion organised in Ahmedabad by a private television channel on 'Budget 2004 Expectations - The Textile Sector'. He added that it was perhaps unique only to India that there were different tax regimes for different players of the textile industry.

If Cenvat was rolled back, all attempts at rationalising the tax structure across the industry will be affected.

Chintan Parikh, chairman and managing director of the Ahmedabad-based Ashima Ltd, said: "We obviously want Cenvat to be implemented across the board."

He stated that while the industry welcomes value-added tax (VAT), as it simplifies tax procedures to a great extent, the Union finance minister must not rollback Cenvat for the powerloom sector because of political pressure.

Naishad Parikh of the Confederation of Indian Industries said that according to information, neither the powerloom units of Surat, nor those of Bhiwandi in Maharashtra, have any objection to Cenvat being implemented in the powerloom sector.

"It is the around three lakh powerloom units in Tamil Nadu which do not want the Cenvat to be implemented for the powerloom industry. Also, there is pressure from certain political parties," said Parikh.

Lalbhai, however, added that after the post-quota regime in January 2005, India and China will emerge as the global leaders in the textile business, purely because of the scale factor and expertise in designing.

"There are other issues as well that the industry will like to discuss with the Central government. But for the moment we strongly advocate for a uniform implementation of Cenvat," Lalbhai said.

Other issues that the textile industry will take up with the Central government are more flexible labour policies not only in special economic zones but also in government run apparel parks.

Also, the industry here is demanding a uniform framework of power rates for the textile industry, as different states have different tariffs, which do not provide a level playing field for all.

Pankaj Chandra of the Indian Institute of Management, Ahmedabad, said according to a survey, productivity across 50 per cent of the spinning, ginning, weaving and texturising units has not gone up over the past three-four years.