Contrary to expectations, the increase in the excise duty on manmade fibre and yarn and their raw materials from 4% to 8%, proposed in the Union Budget 2009-10, has been shrugged off by the textile industry.
Though some sections of the industry feel that the hike is a negative, others say it won’t make much of an impact as it is a marginal increase and can be passed on to the customer.
Sunil Khandelwal, chief financial officer, Alok Industries, said, “Excise duty on polyester products — manmade fibres and yarn — and on raw materials such as PTA and DMT and polyester chips, has been restored to 8% from 4% reduced in the stimulus package. But this is not likely to impact the industry much as it should be able to pass on the increase in duty to the end consumer given that there is huge gap between the cost of cotton yarn and polyester yarn. Also, since the duty can be claimed under cenvat, the net increase in prices for consumers would be marginal —just about Rs 2.”
An official from Indo Rama Synthetics (India) Ltd felt the duty structure has been rationalised. He said before this change, the industry was paying 8% duty on raw material and 4% on finished goods. Now it’s a flat duty of 8% on both.
However, industry body, the Confederation of Indian Textile Industry (CITI), has expressed concerned over the hike. D K Nair, its secretary general, said, “This is a substantial increase and the industry will have to absorb this illogical hike as it cannot be passed on to the consumer. In India, the share of manmade fibre consumption is less than 40% whereas globally it is 60%. Our export share in this segment is only 20%. High duty will bring this down further.”
But P N Thakore, director (finance) at JBF Industries, said the duty can be set off under modified value-added tax (modvat). “The increase can be passed on to the texturiser, who can claim modvat.Besides, polyester has a price advantage to cotton and so the industry won’t be impacted,” he added.
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