» Business » Textile: Budget sops will prevent job loss

Textile: Budget sops will prevent job loss

By Equitymaster
July 07, 2009 11:24 IST
Get Rediff News in your Inbox:

Ridden with problems ranging from higher input costs, poor export orders, foreign exchange fluctuation to low domestic demand most Indian textile companies, particularly the small and medium-size firms have been contemplating either laying off workers or closing down.

The budget does not seem to have offered them any significant relief saving some encouragement to exporters.

Textile companies are trying to add niche value-added material to their product mix to stabilise their margins. Some firms that have also ventured into retail chains are finding it difficult to breakeven due to the economic meltdown.

 Budget Measures
  • 4% excise duty on cotton textiles restored.

  • Tax holiday on export profits extended by one year to FY11.

  • 2% interest subvention for textile sector extended by six months up to March 2010.

  • To add one handloom mega cluster each in West Bengal and Tamil Nadu and one powerloom mega cluster in Rajasthan. In addition, new mega clusters for carpets in Srinagar (J&K) and Mirzapur (UP).

     Budget Impact
  • Restoration of excise duty on cotton textile will enable manufacturers avail of export rebate of the duty paid from CENVAT credit.

  • The handloom mega clusters and export incentives will prevent loss of jobs in the textile sector.

  • Extension of 2% interest subvention for textile sector will reduce the interest burden on the P&L of textile companies this fiscal.

     Company Impact
  • Cotton textile manufacturers like Arvind Ltd. and Alok Industries will benefit from the restoration of excise duty.

  • Companies like Raymond, Arvind Ltd. and Alok that are heavily leveraged will also benefit from the extended interest subvention.

    Get Rediff News in your Inbox:

    Moneywiz Live!