The textile industry is seeking the removal of a prevalent 10 per cent excise duty on the production of synthetic fibre. Industry apex body, the Confederation of Indian Textile Industries (CITI), has also said it would not mind the removal of the existing duty protection on imports if the present excise duty was removed. In fact, resultant competition from imported goods is welcome, according to D K Nair, secretary-general of CITI.
The confederation also wants the removal of the customs duty of nine per cent on import of synthetic fibres.
If such duty cuts are implemented, the price of synthetic textiles will fall and, eventually, trigger an increase in the demand for the products. The raw material for manufacturing synthetic textiles, such as DMT and PTA, are either imported or are priced by domestic manufacturers at rates near to the cost of imports. Compared to last year, the prices of these raw materials have risen due to a general strengthening of commodities and a fall in the value of rupee which is hurting the growth prospects of companies making man-made fibres.
“We are asking for removal of excise duty, as proposed in the National Fibre Policy, which also suggests a fibre-neutral duty structure. The cotton fibre, anyway, has no such so duties,” Nair said. “Also, the relief will help the textile sector as it will encourage production.”
Currently, one-fifth of the country’s total exports are based on synthetics textiles. The move, proposed by CITI, would encourage more players under this category, Nair added.
Reliance Industries, Indorama and Grasim, the country’s big players in this space, would benefit if the excise duty on production was removed. If these players decided to pass on the tax relief, the unorganised sector would benefit the most from it, the confederation said.
Revati Kasture, head of research at Care Ratings, said textiles firms’ profitability would be “impacted if they don’t fully pass on the duty cut benefit”. The Clothing Manufacturers Association of India said the extent to which the consumer would see relief still remained uncertain. “If it is a marginal reduction, retailers who sell garments may not even pass it on to the consumer,” pointed out Rahul Mehta, the body’s president.
The industry believes that the removal of the duty will help all textile producers across the country. Even players in the blended segment will benefit from this tax relief to the extent they use synthetic yarns for blending, it feels.
A cotton textile industry representative said it would be “unfair” to tax the synthetic fibres industry when natural fibres were not taxed. “While cotton textiles are mostly consumed by the upper class, tax is being levied on the synthetic fibre,” he said.