The much-awaited fiscal stimulus package from the government has not cheered up the textiles industry, which has complained of widespread job losses in the current calendar year, as the measures announced were much below the expectations.
The government today announced a package of Rs 1,400 crore under the Technology Upgradation Fund Scheme (TUFS) and 2 per cent interest subsidy up to March 31 next year. But the textile industry had demanded 4 per cent interest subsidy along with reintroduction of the duty drawback scheme.
“The package under TUFS is no additional amount for the industry but simply the backlog sum which was stuck with the government,” Dilip Jiwrajka, managing director, Alok Industries, said.
However, the TUFS scheme will provide the required cash flows to the industry, as companies will get reimbursed for their capital expenditure towards technology upgrade.
The textile industry was given Rs 500 crore under TUFS last week in addition to Rs 1,090 crore allocated in the Budget 2008-09.
Indian exports of textile products stood at $22 billion in 2007-08, as against the world market estimated at $530 billion. But the domestic textile industry with a size of $45 billion is among the top three foreign exchange earners along with gems and jewellery and IT sectors.
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Business Standard has the list of demands made by the Confederation of Indian Textile Industry (CITI) to the government before the stimulus package was announced (see chart).
“It is a survival package but not really a growth package. The money given under TUFS would clear the backlog up to September 2008,” said DK Nair, secretary general, CITI.
Even the interest subvention of 2 per cent is half of what was already available to the industry till September. The Reserve Bank of India (RBI) had withdrawn interest subvention of 4 per cent from October this year.
“The government should have given the interest subvention up to 4 per cent, as this is needed for the industry to grow,” Nair added.
| UNMET DEMANDS |
| * Re-instate duty drawback rates |
| * Increase the interest subvention of 4 per cent on export credit |
| * Double post-shipment validity of export credit to 180 days to accommodate the payment crisis in international markets |
| * Ask state-owned banks to provide soft loans against all government dues |
| * Provide working capital for purchase of cotton to mills at 7 per cent interest rate as applicable to agri-products |
However, Commerce Secretary GK Pillai in an interview to a private TV news channel said the decisions are being reviewed and the government may extend the interest subvention scheme by one more year to March 2010.
The interest subvention is given to the exporters on packing credit from 180 pre-shipment days to 90 post-shipment days. At present, the packing credit to exporters is available at 13 to 14 per cent from commercial banks.
With the current announcement, the exporters will be refunded 4.5 per cent of interest as against 2.5 per cent currently.
“It is a good first step but not enough to boost our exports. We were expecting tax benefits (income-tax exemption on profits earned) for the textile exporters which has not been granted,” said Sudhir Dhingra, managing director of Orient Craft.