Tax bounty for textile units

Finance Ministry approached with slew of proposals

To raise Indian textile exports from the current $15 billion to over $50 billion by 2010, the Union textiles ministry has initiated a series of steps to make the Indian produce more competetive.

The ministry approached the finance ministry to raise the level of duty remission under the duty entitlement passbook scheme for man-made products besides changes in the tax structure.

"We are looking at changes favourable to the man-made textiles sector. The government's objective is to ensure that the exporter should not be burdened by the high cost of raw materials and high level of domestic levies. Exporters in the man-made sector are being reimbursed (the duties paid by them) but not fully," a ministry official said.

It is also in favour of reducing the import duty on more textile machinery items to 5 per cent in the next year's budget. So far, 311 capital goods have been brought under 5 per cent import duty.

The ministry has also proposed to de-reserve 26 items pertaining to the knitwear sector from the list of products reserved for small-scale units.

India also intends to push for a reduction in the average duty on textiles from the present level of around 20 per cent to 3-4 per cent in the non-agricultural market access negotiations currently under way at the World Trade Organisation. A lower duty regime will make Indian exports more competitive in the foreign markets.

With all these measures in place, the ministry is hopeful that the projected growth in exports is achievable.

"We anticipate an increase in export of fabrics and garments, which should surpass even the $50 billion target. This target accounts for a mere 8 per cent share of the world textiles market. We can do more," said textiles secretary R Poornalingam.

Another factor which the government feels will act in favour of Indian exporters is that with the phase out of the textiles quotas from January 1, 2005, the prices of their products could be pared by as much as 10-15 per cent as all quota premiums would come to an end.

The government, in its budget for the current financial year, provided the industry a level playing field and an impetus to the domestic industry to modernise.

"It is now up to the industry to make investments," an official said adding that the fiscal reforms initiated in the textiles sector this fiscal would be continued in the next year's budget.

A helping hand

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• Plan to raise textile exports from $15 billion to over $50 billion by 2010
• Government's objective is to ensure that exporters are not burdened by high costs of raw materials and high levels of domestic levies
• Ministry also proposes to de-reserve 26 items pertaining to the knitwear sector from the list of products reserved for small-scale units
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