Cenvat waiver to help weavers spin revival tale

HANDLOOM AND POWERLOOM SECTOR/ A large number of looms are expected to restart operations

Handloom and powerloom owners at Bhiwandi, Surat and Ahmedabad greeted with fireworks finance minister Chidambaram's proposal to keep the sector out of the ambit of Cenvat.

A large number of looms at these centres which had been lying shut for a while are expected to restart operations soon.

Chidambaram said in his speech this was being done to make the textile industry globally competitive in view of the Multi-Fibre Agreement coming to an end on December 31, 2004.

In other changes, the finance minister said there would be no mandatory excise duty on pure cotton, wool and silk, whether it is fibre, yarn, fabric or garment. Blended textiles and pure non-cotton (polyester, viscose, acrylic and nylon) will have a different tax regime.

Moreover, there will be a mandatory excise duty of 16 per cent on man-made staple fibre, 24 per cent on polyester filament yarn (including textured yarn) and 16 per cent on other man-made filament yarn (including textured yarn).

Every manufacturer "" be it handloom, powerloom or composite mill "" will have the option to choose between two routes: The exemption route and the Cenvat route. Under the exemption route, no excise duty will be payable at any stage (except on man-made fibre and filament yarn).

Under the Cenvat route, credit can be taken for all excise duties paid at earlier stages.

Reacting to the Budget, Arvind Mills managing director Sanjay Lalbhai said, "The government has realised the potential of the textile industry to compete in the international market and the scenario that will arise out of the abolishment of quotas."

Chintan N Parikh, chairman and managing director of the Ashima group, said, "This will definitely provide a level playing field to all and will not allow profits to be derived out of non-compliance."

Chinubhai R Shah, president, Gujarat Chamber of Commerce and Industry, said, "Gujarat holds a major share in Indian textile exports and the incentives and reliefs provided to the sector will make the textile units of the state more efficient and competitive."

D Mandalywala, president, South Gujarat Chamber of Commerce and Industry, said, "This is a golden day for the Surat powerloom industry. Our efforts for abolition of Cenvat has finally borne fruit."

Striking a discordant note, Indo Rama Synthetics (I) Ltd managing director O P Lohia said, "The corporate sector is not too happy because all of its efforts will be put into the tax net. Nevertheless, the effect has been minimised by bringing down the excise duty on certain fibres like cotton from 8 per cent to 4 per cent. The filament yarn tax has been retained at 24 per cent, despite the promise of bringing down the excise duty. Therefore, the gap between the natural and the man- made fibre has increased 6 times (4 per cent to 24 per cent). Hence, the textile industry still continues to function under a similar framework."