Specific duties on textile be revised to match ad-valorem rate

To protect the textile industry, facing slackening demand overseas, from the onslaught of cheap imports, the Economic Survey today suggested that specific customs duties on textiles be revised in such a way that they match ad-valorem tax rates.     

Ad-valorem tax rates are a proportion of the value of product and hence increases automatically once the value of product rises, unlike specific duty.     

"Revise specific duties in the textile sector to ensure that they approximate a similar ad valorem rate as originally intended," the Economic Survey added.     

It suggested that these duties be reduced gradually so that they do not exceed 30 per cent ad valorem and convert them to ad-valorem rate once WTO negotiations are concluded.     

High interest rates, lack of credit, high raw material prices and recession in the US and Europe have led to decline in the country's cotton textile industry.     

All these factors, the Survey noted, resulted in the production decline of textile fabrics by 1.9 per cent to 54,966 million square metres in 2008-09.      

The powerlooms and handlooms sector production declined by 3.1 per cent and 3.9 per cent, respectively, in 2008-09 over a year ago period.

"Factors such as higher price of cotton, high interest rates, problems in credit availability and demand slowdown in major importing countries led to the decline in cotton textiles," the survey said.     

However, the hosiery industry saw a modest rise of 2.3 per cent and the mill sector registered a marginal growth of 0.8 per cent in the last fiscal compared to the previous year.     

With drying of export orders and slackening of the domestic demand, the industry is passing through hard times.     

The country's textile exports declined by about 10 per cent in 2008-09 to around $20 billion compared with the previous fiscal, due to slump in demand from markets like the US and Europe, Textile Minister Dayanidhi Maran has said.     

The textile industry also suffered because of high cost of raw cotton. The government had increased the minimum support price by 40 per cent in 2008-09.     

Having grown by over 11 per cent in the first six months of 2008-09, the textile exports started declining in October ending the fiscal with overall decline of 10 per cent.     

Among the textile exports, the worst hit was handicrafts which saw a decline of 48 per cent in 2008-09 followed by cotton yarn and jute products which fell by 11.8 per cent and 9.5 per cent respectively.     

The industry is the second largest employer after agriculture employing 35 million people.