Textile dept decides to take up issue on duty rationalization with PM

This is for first time that the Indian department of textiles has taken up the issue of “duty rationalization” with the PM, although it has noted that the approvals of other ministries are key to making such plans a reality. At present, man-made fibres attract a 12% excise duty while cotton fibres attract none. Similarly, imports of some of the raw materials for producing man-made fibres are taxed heavily and those of their finished products are taxed lower.

This intricate duty structure in man-made fibres, for long a major irritant in the development of the textile sector, could be altered in sync with global practices if the latest recommendations of the textile ministry are accepted by the Prime Minister’s Office.

The industry has long been demanding a reduction in the excise duty on man-made fibres, saying such a disparity is preventing domestic producers from scaling up operations and, consequently, India’s textile market continues to be cotton-driven. Such a situation also hurts India’s export competitiveness in the man-made textile segment. While man-made fibres account for around 70% of the world’s total fibre consumption, they make up for less than 30% of domestic demand.

In a recent presentation to Prime Minister Narendra Modi, textile secretary SK Panda is learnt to have listed eight short-term initiatives — including “rationalization” of duties on man-made fibres, further simplification of labour laws, facilitating more working capital to mills, modification of the Technology Upgradation Fund Scheme (TUFS), increasing cotton productivity and launching Cotton Technology Mission II — to be undertaken within the next one year under the ‘make in India’ programme.

The Chemicals & Petrochemicals Manufacturers’ Association and the Confederation of Indian Textile Industry have sought a cut in the excise duty on man-made fibres from 12% to 6% in representations to the Centre recently. In a pre-budget memorandum, CITI has recommended that a 2% excise duty on other value-added products from man-made fibres.

Moreover, raw materials such as purified terephthalic acid (PTA) used for making polyster staple fibre (PSF), filament yarn (PFY) and film that attract a 5% import duty, apart from an anti-dumping duty in the range of $19.05-117.09 per tonne for purchases from China, South Korea, Thailand and the EU up to April 2015.

PTA users, led by Indo Rama Synthetics, stated last month that the Centre’s decision to impose dumping duty (in the range of 3-14%), along with the import duty, when the PSF and PFY attract just a 5% basic customs duty amounts to promoting the retrograde inverted duty structure whereby raw materials are taxed higher than finished goods.