Ailing textile sector pins hopes on FTP

NEW DELHI: The Indian textile industry, reeling under the vagaries of the global economic slowdown, has pinned its hopes on the forthcoming foreign trade policy (FTP) to be announced later this month for succour. Demands put forth by the industry includes exemption from payment on taxes on all services and a refund of state level duties by the Centre to the extent of 4% of the value of exports.

The textile ministry has taken up some of these demands with the commerce and the finance ministries, a government official, who did not wish to be named, told ET.

The confederation of Indian textile industries (CITI), the umbrella body including a number of textile associations, has come up with a detailed report on its expectations from the FTP which will sson be submitted to the textile industry.

The industry wants exemption from all service taxes. At present, exporters are allowed exemption on taxes for certain identified services.

The report has also made a case for a refund of state level duties like CST, electricity duty and mandi tax, which amount to 4%-6% of the value of exports.. Since it will be difficult to recover it from individual states, CITI has suggested that the Centre should give a refund equivalent to 4% of the export value.

The industry also wants cotton yarn and cotton fabrics, which have huge export potential and have been badly hit due to the recessionary global circumstances, to be included in the focus product scheme that provides cash incentives for export of identified products.

The report suggested that the Vishesh Krishi and Gram Udyog Yojna (VKGUY), which offers a 5% incentive to exporters of select products, should be discontinued for raw cotton. It explained that export incentives had pushed up cotton prices in the domestic markets making Indian cotton even more uncompetitive in the global markets.