Saturday, 19 March 2016

What lies in the budget for the textile industry?

Textile Budget


The budget for the financial year 2016-2017 is now out, and as expected it envelops various avenues for the textile industry as well. In the budget, Mr.Arun Jaitley, the finance Minister made numerous announcements, the most imperative of which was that the basic custom duty for raw materials that are used in technical textiles would be reduced to 2.5%. These raw materials would include fibres such as aramid flame retardant, para-aramid, nylon staple, nylon anti-static staple and modacrylic as well as yarns such as nylon 66 filament, flame retardant viscose rayon andpolyester anti-static filament. This is a welcome move, as it will ensure that the input cost for manufacturers of technical textiles is substantially reduced.

In addition to it, the basic customs duty on the import of certain specific fabrics have also been reduced to nil, however, only in the case when they are to be used for manufacturing garments for the purpose of export.

Another welcome declaration pertaining to the textile industry was that the budget allocation was increased to Rs. 4594.82 crores as opposed to Rs. 4326.44 crores in the previous year. However, the Amended Technology Upgradation Funds Scheme (ATUFS) has been allotted Rs. 1480 crores, lower than the sum of Rs. 1510.79 crores that was allocated in the year 2015-16.

With this budget, it has become increasingly clear that the focus of the government is on boosting the growth of the farmers as well as the rural sector, which will eventually help in the improvement of the overall consumption of both, textiles and apparels. It is expected that the increase in expenditure by the government in rural areas will trigger demand from this segment, which will subsequently lead to the growth of the domestic textile market in the near future.

In the budget, it was also proposed that the excise duty will change for branded readymade garments as well as made up textile articles, with the retail price of Rs. 1000 and above. The change would be of the range of nil to 2% and from 6.25% without input tax credit and 6.25% to 12.5% with input tax credit. This is not very clear from a domestic manufacturer’s point of view and further clarification of the same is now awaited.

The government’s goal to double the income from agriculture by 2020, will eventually result in a boost in cotton farming as well, thus creating better opportunities for farmers.

The textile industry has a mixed response towards the union budget for the upcoming financial year. Since the exports pertaining to the industry are already suffering a blow, it was expected that a few incentives would be brought in, which unfortunately did not happen. Moreover, the domestic industry also went unhappy due to the inclusion of the garments under excise duty. A welcome move was the inclusion of textile machinery and accessories under the Make in India campaign. Around 45% of the machinery and accessories are made in India, while the rest are imported. It is for this reason that TADF has availed funds to the industry to increase the indigenous production and reduce exports, however, the industry was also looking forward to some concrete support with respect to setting up of the requisite facilities.