Reduce customs & excise in Budget'08-09 says Textile industry

Confederation of Indian Textile Industry (CITI), the apex Industry Chamber of the textile and allied industries, requested to P. Chidambaram, finance minister, to reduce customs and excise duty on Man-made Staple Fibres and Filaments, Cotton, Furnace Oil, Textile machinery, their components and spares and on some other products. Following is the details of proposal:

CUSTOMS DUTY
Man-made Staple Fibres and Filaments
Proposals - Reduce customs duty to 5% and remove ACD of 4%.
Explanation
Fibres and filaments are primary raw materials and higher cost at this stage has a cascading effect on the entire textile value chain. There are no vulnerable units producing these items in the country and the profitability of the manufacturers is fairly high. Thus, there is no need for undue protection of the producers through high customs duty. ACD is not applicable to woollen fibre already. Our request is that the same treatment may be extended to all fibres. It may be noted that though the ACD is cenvatable, the textile industry is not in a position to utilize this facility, since most of the units in this industry are in the zero duty option for excise payments.
Cotton

Proposals - Reduce custom duty to 5% and remove additional customs duty of 4%.
Explanation
Cotton is the largest used primary raw material in the textile industry of India accounting for nearly 60% of our fibre consumption. Domestic cotton prices have been increasing substantially during recent years and more than 20% of the cotton produced in the country is currently getting exported. Imports are less than 2% of domestic production and mostly of extra long staple cotton which does not compete with domestic production. With increase in production and improvement in quality of domestic cotton, import of cotton will now be only in the segments where domestic production is insufficient and therefore imports will not offer any competition to domestic cotton. Therefore, the present level of 10% basic customs duty and 4% ACD only results in eroding the price competitiveness of the entire cotton textile value chain. On the ACD of 4%, the points indicated above in the context of man-made fibres and filaments apply.

Furnace Oil
Proposal - Withdraw customs duty on imports for captive consumption by textile industry.
Explanation
Power cost in India is considerably higher than in our competing countries. State Electricity Boards are unable to supply sufficient power to the industry. There are also serious problems of quality in power supplied by SEBs. Therefore, T&C industry is forced to resort to captive power generation. A large number of textile units have Captive Power Plants (CPPs) using furnace oil. Furnace oil prices have increased substantially making CPPs based on furnace oil uncompetitive. Replacing these CPPs is a very costly proposition. It is therefore suggested that import of furnace oil specifically for use by Captive Power Plants of T&C units may be permitted without customs duty.

Textile machinery, their components and spares
Proposal - Withdraw customs duty except on spindles.
Explanation
There is substantial domestic production of spindles. Other textile machinery production in the country is insufficient and is not of contemporary technology. It is, therefore, requested that import of textile machinery other than spindles may be allowed without customs duty only for the period until the domestic textile machinery industry establishes sufficient production of such machinery in terms of quantity and quality.

EXCISE DUTY
Man-made Fibres
Proposals - Reduce mandatory basic excise duty to 4%.
Explanation
Currently, man-made fibres attract 8% mandatory excise duty. For the primary raw material, this level of duty is too high and it has a cascading effect on the entire textile value chain. Since the textile industry is mostly in zero duty option for excise duty, Cenvat facilities are also not available for fibre duty. It is therefore requested that mandatory excise duty may be reduced to 4%.

Textile and clothing products of man-made fibres
Proposal - Reduce optional excise duty to 4%.
Explanation
Currently textile products of man-made fibres from yarns to garments are subject to an optional excise duty of 8%. In the case of cotton products, optional duty is 4%. It is suggested that optional duty of man-made fibre based products may also be reduced to 4% so that the excise incidence will be fibre neutral.

Furnace oil
Proposal - Reduce mandatory basic excise duty to 8%.
Explanation
Currently, basic excise duty on furnace oil is 16%. The need for using furnace oil for CPPs has already been explained under the heading ‘Customs Duty’. At current prices, such high incidence of duty makes furnace oil practically out of bounds for textile industry. It is requested that the BED may be reduced to 8% so that the use of furnace oil in CPPs can become more viable for the textile value chain.

Textile machinery, their components and spares
Proposal - Reduce mandatory BED to 8% for machinery which are not exempted from excise duty.
Explanation
Currently textile machinery, their components and spares are subject to a BED of 16% except in the case of a few machines which are exempted. This is too high, especially for the nascent and potential textile machinery industry of India. It is suggested that BED may be reduced to 8% so that the domestic textile machinery industry can grow and achieve the vast potential available in this industry.