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Ensure cheap credit to textile cos, Nath to PM

The commerce department has taken up cudgels on behalf of the textile industry to secure availability of cheap credit for the sector beyond the end of next month.

, ET Bureau|
Aug 20, 2008, 03.27 AM IST
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NEW DELHI: The commerce department has taken up cudgels on behalf of the textile industry to secure availability of cheap credit for the sector beyond the end of next month. Commerce & industry minister Kamal Nath has written to Prime Minister Manmohan Singh urging him to intervene and ensure continuation of interest subvention of 4% for the sector facing competition from neighbouring countries.

All the sops given to exporters to tide over the sharp rise in rupee last year are scheduled to be withdrawn on September 30. Fresh incentives given by China and Pakistan to its textile industry, on the other hand, are expected to make life tougher for Indian manufacturers.

Mr Nath���s letter comes after finance minister P Chidambaram rejected his request for continued support to the second-largest employment generating sector after agriculture. Mr Nath urged the PM to direct finance ministry to maintain the interest subvention of 4% for the textile sector to help it tide over the current crisis. There is not just lower demand in the Western market, especially from the US, due to the economic slowdown, but higher raw material prices have also been erasing profit margins.

According to Confederation of Indian Textile Industry, India���s competitors in China and Pakistan are already being given new incentives to help them during the troubled times. ���China has increased VAT refund given to synthetic and cotton producer to 13% against earlier rates of 9% and 11%, respectively. Pakistan, too, has introduced a 6% R&D assistance to its garment exporters which is now being extended to other segments of the textile sector,��� CITI secretary general D K Nair said.

Mr Nair said India should at least make efforts to ensure that state taxes paid by exporters are refunded. ���In India, we get stuck in technicalities. When it is acknowledged that state taxes need to be refunded, it should be done no matter whether it is done by the state government or the Centre,��� he added.

The withdrawal of interest rate subvention will have a crippling effect on the sector, the industry claims. Mr Nath���s plea comes in the wake of the Reserve Bank of India announcing termination of the interest subvention benefit from September 30 in view of the fall in rupee against the dollar. Under the scheme, the government picks up a part of the interest burden to promote exports. Mr Nath has also pleaded for the sector getting higher drawback and DEPB (duty entitlement pass book) rates. DEPB scheme is to neutralise the incidence of various types of duties charged in the input material.

India���s exports to the US in the January-June 2008 period increased by a mere 1.79% instead of the normal growth rate of 15-20%. Mr Nair said total textile exports in the current fiscal might be even lower than $20.5 billion of exports in the previous fiscal.

Although these benefits were extended in the wake of the textile and clothing sector suffering from the rupee appreciation, Mr Nath wants them continued even after depreciation of the rupee on the grounds that many other factors have come into play to reduce competitiveness of the sector. The move comes at a time when Bangladesh is exporting more textiles than India.
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