Textile sector needs duty rejig for fresh investment

New Delhi, May 25 (UNI) The Assocham today urged the government to align duty structure of the domestic textile sector in order to encourage global manufacturers and private equity funds to invest in partnership with the small scale manufacturers, as it needs fresh investment for capacity expansion.

Otherwise the CAGR (Compound Annual Growth Rate) of this sector, which attracts lowest level of foreign direct investments in spite of the fact that 100 per cent FDI is allowed in it under automatic route, will go down to six per cent from its earlier predictions of 22 per cent by 2010, it further said.

''The textile industry is in the dire need of fresh investment in capacity expansion, modern technology and machine installation ...the global manufacturers and private equity funds should be encouraged to invest in partnership with the small scale manufacturers to boost investment in the sector,'' Assocham President V Dhoot said.

Releasing a survey on 'Indian Textile: Weaving a Global Spin' brought out by Assocham, Mr Dhoot continued that with continuing bottlenecks in place, the projected investment for 2010 could fall at 16 billion dollars from projected 55 billion dollars and job prospects stay for a meager lot of 19 million workforce as against projections for 65.4 million.

The sector, which had attracted investment of Rs 33,000 crore during fiscal 2006-07 against Rs 21,850 crore in the previous year, is governed by stringent labour laws which hamper its competitiveness and delays induction in reforms of it, the study highlighted.

The total size of the textile sector is 47 billion dollars with domestic market at 30 billion dollars and export market at 17 billion dollars.

Mr Dhoot said hardening of rupee has already effected the competence of textile sector as its margins have lowered and international competition has become stiffer. The textile sector would lose its glare for good provided reforms are further delayed.

The Assocham President said excise duty imposed on finished man-made fabric is eight per cent while that on its raw material is 16 per cent.

The chamber has also recommended easing of interest rates on export credits, premier for export insurance, speeding up the clearance of excise duty and central sales tax reimbursement so that these measures act as cushion and help exporters to realise higher export proceeds.

UNI SBA AK KP1718