FM promises tax breaks for textiles

Cenvat waiver to stay, sops likely for manmades.

In a move aimed at making the domestic textile industry competitive after trade quotas are abolished at the end of the year, the government today announced the continuation of Cenvat exemption for cotton, silk and natural fibres for five years.

Replying to discussions on the supplementary demands for grants in the Lok Sabha today, Finance Minister P Chidambaram also hinted at tax concessions for manmade fibres in the next Budget and said the government was looking at "a helpful tax regime" for the sector.

"The textiles industry can take advantage of the assured tax regime and become competitive," Chidambaram said.

The textile ministry has already recommended the abolition of the textiles committee cess, changes in the duty structure for synthetic yarn and reduction in the Customs duty for remaining textile machinery to 5 per cent.

Earlier replying to a question in the Rajya Sabha, Chidambaram said bonus on the insurance policies of the Life Insurance Corporation (LIC) might have to be reduced if the required solvency margin was increased.

He said the LIC had been asked to suggest changes that would ensure higher returns to policyholders in view of the Insurance Regulatory Development Authority's requirement that insurance providers keep the required solvency margin at 7 per cent of the total liabilities instead of the earlier 5 per cent for LIC.

Chidambaram told the Lok Sabha the additional outgo on account of the increase in supplementary grants was only Rs 5,063 crore out of a total demand of Rs 3,8621.77 crore.

Planned expenditure constituted Rs 2,930 crore, which was 60 per cent of the additional outgo, he said. The increase was in areas like education, health, mid-day meal, rural housing and employment --- the priority areas for the UPA government.

Chidambaram also said the government would implement the Twelfth Finance Commission recommendations in letter and spirit. Stating that the Centre wanted to build a co-operative federal system, he said, "We appeal to the states to make India a strong economy."

Reacting to questions raised on the National Highways Development Project, he said the National Highways Authority of India had so far spent Rs 19,500 crore on the Golden Quadrilateral. Work on 76 per cent of GQ had been completed as of November 30, 2004 while that on north-south east-west corridors it had just begun.

FM takes a call

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• Cenvat exemption for cotton and silk for another 5 years
• LIC bonus likely to be reduced
• Finance Commission report to be implemented
• Govt not to bail out all cooperative banks