One sector that's always buzzing around the Union Budget is the textile space. However, Naishad Parikh, advisor and board member of Arvind Group expects no major changes in this year budget for the textile industry. However, he says, the interest subsidy may be recalibrated.
Meanwhile, Nitin Kasliwal, chairman of S Kumars is confident that the government will reinstate the technology upgradation fund (TUF) scheme. "We need higher working capital allocation," he adds.
Below is a verbatim transcript of the interview.
CNBC-TV18: Line out what you expect to here in the budget this time round specific to your sector?
Parikh: We are not covered under any excise duty. Therefore we are not expecting any changes to happen.
CNBC-TV18: There are some issues like the export ban on cotton and yarn, which the industry has been pushing to get lifted. Do you expect any developments there?
Parikh: They are not strictly budgetary issue but they are very relevant for the industry. For cotton, there is a quantitative restriction on export of 55 lakh bales. That was based on expectation of total harvest of 325 lakh bales, which is little lower than that. The main contention was that should it be exported from October-December onwards or should it be a calibrated export. Had it been a calibrated export the situation would be easier.
With respect to the ban or physical restriction on cotton yarn export, it was an avoidable step. Instead of going ahead with physical restriction one could have sued the fiscal tool. One would have dropped the duty if one would have found the pricing higher.
CNBC-TV18: The one thing, which usually comes through, is some kind of allocation change under the TUF scheme. Do you expect anything major this time?
Kasliwal: The industry is eagerly looking forward to the TUF scheme being reorganized. In fact, the government has held the TUF scheme temporarily — even 2009-10 allocations are still pending. We are hopeful and confident the government will reinstate the TUF scheme and take it forward because there is phenomenal potential to grow the Indian exports in the world market as well as to grow the Indian industry domestically. There is very strong demand from both domestic and overseas markets and to that extent the textile industry in India can really force to reckon with globally.
CNBC-TV18: What kind of reorganization in specific would you want to see on the TUF scheme? Is it purely about fund allocation to that scheme or do you think the modalities might change around a little bit?
Kasliwal: There are minor modality changes that are expected — some equipment maybe excluded. There is already over capacity in some equipment, so to that extent there will be some reallocation. But otherwise we are looking at the same 5% subsidy being carried forward and the allocations being allotted and increased for the coming years.
CNBC-TV18: There seems to be some concern on the impact the TUF scheme has on the balance sheet of textile companies. Do you expect that to see any recalibration through the budget speech?
Parikh: The TUF scheme is very critical at this juncture because when the rate of interest are very high, textile is investing now in the capital goods and having substantial expansions taking place. It would definitely have an impact.
What is important is that they provide the continuity from April 1. When the scheme ends and you are announcing a new scheme you cannot have a break because otherwise it will differentiate between those who have invested later and those who have invested on time.
So that needs to be avoided. But TUF Scheme will definitely be there that is what we all hear and we expect it to be there. The only change we expect is was across the board 5 per cent — the interest subsidy maybe recalibrated based on the priority of investment. It can be between 4 and 5 per cent or around that.
CNBC-TV18: Do you expect any change in the excise duty on textile machinery?
Parikh: It has been a request for the last two-three years but unfortunately that is not tenable. The reason being that the CENVAT rate for all the goods is one common rate, which is currently at 10%. They have all their inputs coming in at 10% and it may lead to a little distortion when it comes to taking credit and other things. So they may not like to change.
Again it is an end use specific concession. This is something, which the government is not considering positively. If it happens it would definitely reduce the burden of 2 per cent. But the best way would be for exporters is if there is mechanism that it can be considered in drawback rates, I think that would solve the problem.
Comments
0 comment