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Budget sets new tone for Indian Textile Industry

When he came on textiles in his fourth budget speech, Finance Minister P Chidamabaram firstly noted a fact that a rejuvenated textile industry is geared to meet the global challenge. This statement itself can boost people of this industry.

Next was the textile industry's cherished demand, Chidambaram heard in extension of the Technology Upgradation Fund Scheme (TUFS) for another five years, a decision would spur an investment of at least Rs 1,25,000 crore in the sector. ''TUFS will be continued during the 11th Plan and against a provision of Rs 535 crore in 2006-07, Rs 911 crore would be provided for TUFS in 2007-08," Chidambaram said while presenting the Union Budget 2007-08 in Parliament. Notably, TUFS, launched in 1999 to provide interest and capital subsidy for modernisation of the textile sector, was slated to expire in March 2007.

The Confederation of Indian Textile Industries (CITI) welcomed the extension, saying taking advantage of the scheme, around Rs 25,000 crore would be invested in the textile sector this year. CITI Secretary General D K Nair stated: ''The investment under TUFS has been doubling every year for the last four years and would touch Rs 25,000 crore this fiscal. After the extension, this pace of investment would continue.''

Till date, projects worth Rs 52,847 crore have been given loans under the scheme. The industry, however, felt the allocation of Rs 911 crore would be insufficient to meet the demand of the scheme. Last year's allocation had exhausted much before the end of the fiscal and the government had to give an additional Rs 313 crore for the scheme.

The minister also announced an enhanced allocation of Rs 425 crore for textile parks under the Scheme for Integrated Textile Parks (SITP). ''So far, of the 30 parks sanctioned under SITP, 26 have been approved. The provision for these parks has been increased from Rs 189 crore to Rs 425 crore in 2007-08,'' Chidambaram added.

The Finance Minister also announced a cut in customs duty on polyester fibre and yarns to 7.5 per cent from 10 per cent. This would make imports viable and increase the consumption of man-made fibre in the country in line with global trends.

While reducing Customs duty on polyester fibre and yarns, Chidambaram announced a cut in import tariff on raw materials so that domestic producers are not put at a disadvantage. CITI was, however, disappointed that the minister did not consider its demand of reducing excise duty on man-made fibre. On the handloom sector, the Finance Minister said the government proposes to develop an additional 100-150 handloom clusters in 2007-08.

The cluster approach for the sector was introduced in 2005-06 and has covered 120 clusters. The Health Insurance Scheme that has so far covered 3,00,000 weavers to be extended to more viewers. The scheme will also be enlarged to include ancillary workers. Allocation for handloom sector enhanced to Rs 320 crore (Rs 241 crore in 2006-07).

A new scheme with a provision of Rs 22.50 crore for the modernisation and technology upgradation of the coir industry, with special emphasis on major coir producing states such as Kerala, Karnataka, Tamil Nadu, Andhra Pradesh and Orissa.

Budget proposals on textiles evoke mixed reactions CITI Chairman Shekhar Agarwal said the continuance of Technology Upgradation Fund Scheme for the whole of 11th Plan period will provide substantial assistance to the industry for building capacities required for meeting the increasing demand for textile products at home and abroad. He, however, was disappointed with the allotment of Rs 911 crore made for TUFS for 2007-08 as the amount will be woefully inadequate.

Praising Chidambaram, Forbes Gokak Ltd Managing Director H S Bhaskar said it it was overall continuation of the past years policies that have earned laurels for country's textile industry, so far. ''Overall growth of the textile industry will be triggered with the continuation of TUFs and the rising retail sector,'' he added.

Southern India Mills Association Chairman (SIMA) S V Arumugam said the extension of the scheme would help realise the envisaged investments of Rs 1.94 lakh crore and creation of 14 million jobs during the Eleventh Plan. ''We will be able to balance our investment plans as we now know the scheme is available for another five years,'' he said.

Similarly, Tirupur Exporters' Association President A Sakthivel said the garment sector is totally happy and thanks the Finance Minister for extending the much needed scheme during the Eleventh Plan and also increasing the provision of funds to the scheme. The associations have welcomed the announcements relating to reduction in customs duty on polyester fibre and yarn from 10 per cent to 7.5 per cent and increased allocation for the Integrated Textile Park scheme.

SIMA expressed disappointment that customs duty had not been brought down for other man-made fibres such as viscose. However, the association was disappointed with the continuance of Fringe Benefit Tax and increase in education cess from two to three per cent on all taxes.

Another major concern was extension of service tax for renting of immovable property for use in commercial business, which would result in increasing production cost.

Gupta Synthetics Director Sunil Gupta said: ''The Union Budget is lackluster. It has no special benefits for the synthetic yarn industry and demands of the industry have been ignored.'' Describing Chidambaram's budget as 'good' Textiles Committee Member Secretary Rajiv Agarwal said the extension of the TUFs scheme would benefit the industry overall.

The handloom industry will get a boost as more clusters would come up and backed by more workers within the sector covered under the insurance scheme, will get the best attention that it never had in the past, he added.



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Salient features / Highlights of the Foreign Trade policy


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