Andhra textile units to get 50% VAT back

In a latest move to encourage textile and downstream industry, the Andhra Pradesh government has decided to offer 50 per cent value added tax (VAT) reimbursement to textile processing units that are coming up in the state.

According to official sources, chief minister Y S Rajasekhara Reddy cleared the file to this effect a couple of days back as a follow-up to the measures already announced in the recent textile policy.

The state government considers the lack of processing capacities in the organised sector as a major bottleneck in the growth of textile and garment industry in the state as is the case in other parts of the country.

The government's move is expected to pave the way for major investments into this sector as three companies have already lined up their investment plans in this regard. The benefit of 50 per cent VAT reimbursement would be extended to projects of mega status for a period of five years, according to the government decision.

Tirupur-based Prime Textiles is planning to set up an integrated textile unit with an investment of about Rs 350 crore in Guntur district, industries department officials told Business Standard. Similarly, Kamozzi Textiles, promoted by Ottori Kamozzi of Italy, has recently approached the state government to set up an integrated textile unit with an investment of over Rs 500 crore to Rs 600 crore at Jangoan in Warangal district. Jayavenkataramana Textiles Limited, promoted by Hyderabad-based Nuziveedu Seeds Limited, too has approached the government for necessary support to establish a textile manufacturing facility in the state. All the three companies are expected to set up processing units here.

The new-found enthusiasm in the textile sector is already visible in the cotton growing regions of the state, which are known for producing quality cotton across the country. According to industries department officials, spinning mills with a total capacity of about 5 lakh spindles are coming up in Guntur district where Chilakaluripet has already established itself as a major base for spinning activity.

"Processing requires a lot of water as well as modern technology to minimise environmental pollution, which is a major concern for processing industry," a senior government official said.

As part of its strategy to encourage the labour-intensive textile and garment industry, the state government has already brought spinning industry from negative list to positive list under the new industrial policy.

With the establishment of processing units, which is required for colouring the cloth or yarn, the government sees good prospects of new investments in weaving and garment industry coming up in the state. Processing units too are eligible for 10 per cent capital grant under the Centre's textile policy.

The state government, under the new textile policy, had announced a range of incentives to new units, including a rebate of 75 paise on each unit of power consumed by these industries.

These measures place the textile sector in a more favoured treatment category when compared with other industries since under the new industrial policy, the government had announced only 25 per cent VAT reimbursement and a 50 paise rebate in power tariff to new units in other sectors.