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Tex Talk
Finance minister responds

On April 30, the Lok Sabha passed the Finance Bill 2003. But, only after the finance minister, Mr Jaswant Singh proving his concern for the textile industry. Yes, Mr Singh once again announced a package for the benefit of the textile industry just as he did when he presented the Budget on February 28.

Admittedly, Mr Singh was under great pressure from the different wings of the textile industry, particularly the powerloom manufacturers, who want him to exempt them from the newly proposed excise net for the completion of the CENVAT chain. These manufacturers were on strike since April 1 because their representatives did not get an audience with the finance minister to describe their plight. But, the minister received the message in its proper form through the media and the MPs as well. This was reflected in his new package which amends the earlier version of the Finance Act.

So, the minister said that hereafter, the small scale powerloom units will have an option to register themselves for the CENVAT or opt out. That means, they could decide their preference. This was the case until now for some units and that was what the small scale sector wanted. In any case, Mr Singh has now fully exempted from the purview of excise duty small powerloom units operating up to 10 looms. Also, the powerloom sector has been given immunity against scrutiny in respect of stock declaration. That means, wherever the value of stocks declared, does not exceed Rs 10,000 per powerloom, such a declaration will not be subject to scrutiny. As a transitional measure, the powerloom sector was asked to declare the stocks as on March 31, 2003, to make them eligible for CENVAT credit. But, the weavers were frightened to go to the central excise authorities for registration. In other words, as of now, there is no problem of excise inclusion for the small scale powerloom units and hence, they can be back at work, rather than wasting their energy on streets. In effect, this means that powerloom weavers with a turnover up to Rs 20 lakhs stand exempted from the excise purview. They would not have to worry about the CENVAT chain on fabrics. But, the South India Textile Manufacturers’ Association (SITMA) said that the weavers wanted a a much higher turnover limit of Rs 50 lakhs.

For the readymade garments, some excise exemptions have been announced. Unbranded, woven and knitted readymade garments can enjoy excise exemption with prescribed ceiling for the first clearance as also the annual turnover. Also, the exemption schemes proposed for the garments have been extended to rubberised textile fabrics, cotton belting, mosquito nets and fabrics of mono filament. Another major excise benefit relates to the reduction to half the level (now, 5 per cent) on the predominantly hand processed fabrics on which a few specified finishing processes are carried out with power or steam for pure cotton fabrics. For other fabrics, the duty has been reduced to 8 per cent. Likewise, the excise duty on interlining fabrics reduced from 16 per cent to 10 per cent.

But, the FM is concerned about preparing the industry to face the new challenges emerging after December 2004 as is evident from his expanding the coverage of the concessional customs duty of five per cent to 117 more categories of textile machinery and their parts. Similarly, he has extended the concessional customs duty of 10 per cent to twisters and rewinding machines to all users. Another benefit has been announced in the form of reduction in import duty on rags from 25 per cent to as low as 5 per cent. Mr Singh specifically referred to the new challenges faced by the textile industry and said that some measures were being announced to prepare the industry to face the eventualities in the post-MFA scenario. This direct reference to the new challenges indicates the concern of the government which wants to ensure that the textile industry remains competitive in any environment. Also, Mr Singh referred to the textile industry as the second largest employment generator after agriculture. This means, there is definite understanding amidst the policy makers that the textile industry cannot be allowed to perish. While this is a welcome move, the immediate need of the hour is the constant interaction with the various sectors of the textile industry to ensure that all their genuine problems are duly addressed without letting them all go to the streets closing their productive units. Even now, although Mr Singh has granted some of the concessions, he allowed the segments of the industry to perish in hot sun on the streets raising avoidable anti government slogans. If Mr Singh was right, he need not have gone for a rollback now. If he was wrong, that was because of the absence of a clear understanding of the issues ahead of the industry. So, the best approach to keep the textile industry always competitive is to have constant interactions and timely corrective measures. In this, the role of the textile ministry is indisputably significant. It is imperative that the ministry acts as the vital catalyst to make the units run in the most effective way for the benefit of the owners, workers and the nation as a whole.

- P S Sundar