Mixed reactions to the Union Budget

Friday, 16 March 2012

FM Pranab Mukherjee’s Budget for the year 2012-13 in Lok Sabha today has had diverse reactions from the textile and apparel industry. While the industry has welcomed it, it has also expressed concerns over increase in excise duty from 10 to 12 per cent. The industry was hoping for a relief from the excise burden. Reacting positively to, Gautam Singhania, Chairman and MD, Raymond said, “The Union Budget is a positive step towards getting the system back on track. Although big reformist measures were not proposed, still the Finance Minister has done a balanced job and has targeted growth across social classes. The reduction of duty on branded garments and abatements to the textile sector, although marginal, is a step in the right direction.”

Though disappointed with the general increase of excise duty, Rahul Mehta, President, Clothing Manufacturers’ Association of India (CMAI) appreciates the decision to increase the abatement on excise duty on branded garments from 55 per cent to 70 per cent. “Actually the excise duty has gone down. In general the excise duty has gone up from 10 per cent to 12 per cent but the abetment of the excise duty has gone up from 55 per cent 70 per cent. Net effective rate of excise duty has gone down from 4.5 per cent to 3.6 per cent. I am not expecting any major change in price point, it just reduction of 0.9 per cent. It’s hardly a difference which consumer would get excited about. From the industry perspective it is something better than nothing. We are disappointed that we have been included in general from 10 per cent to 12 per cent, we are happy that the finance ministry has given some gesture and some relief by getting down the net effective rate to 3.6 per cent.

The Confederation of Indian Textile Industry (CITI) too has welcomed some of the announcements included in Budget. In a statement, S V Arumugam, Chairman, CITI stated that abolition of the custom duties on automated shuttleless looms and its parts is a welcome move since the weaving industry in the country needs urgent modernization.

He also welcomed the proposal to establish two more mega handloom clusters and one mega power loom cluster and a proposed package for loan waiver for handloom weavers and a pilot project for geo-textiles for Northeast. He added that while CITI’s request for removing excise duty on branded garments and made-ups has not been incorporated in the Budget, the effective rate of excise duty for these products has been reduced from 4.5 per cent to 3.6 per cent of sales price, which is also a positive move.

Vinod Kumar Ladia, Chairman of The Synthetic & Rayon Textiles Export Promotion Council (SRTEPC) said that the hike in excise duty for man-made fibre, filament yarn, etc., from 10 per cent to 12 per cent would make Indian man-made fibre textiles uncompetitive against natural fibres. He also added that this will go against the spirit of the proposed National Fibre Policy, which envisages a level-playing field for man-made fibre textiles so that the use of the same is increased. He also pointed out that, man-made fibre consumption in India is only 35 per cent in India, as against the global usage of 68 per cent.

Ladia also expressed his concern over the increase in the rates of service tax to 12 per cent. However, he welcomed the move to have a simplified mechanism to refund service tax to the exporters.

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