Govt may scrap textiles panel cess

NEW DELHI: The textiles committee cess may soon become history. The law ministry has approved a proposal of the textile ministry to abolish the cess. The abolition of the cess would enhance India’s competitive position in global textile trade by reducing transaction costs of garment exports.

It will also save domestic textile manufacturers from unnecessary paper work. When first introduced, the cess was 0.025% of the production value, which was increased to 0.05% since June 1, 1977.

A Cabinet note to abolish the textile committee cess is in circulation and it is expected that the matter may be put before the Cabinet after Prime Minister returns from Latin America, government sources said.

Even as the cess amount is not significant, it has been one of the major irritants for both the government as well as textile companies. “We always finds it difficult to explain it (the cess) in global trade forums such as World Trade Organisation,” a trade expert said.

While the government has proposed to do away with the cess, it has, however, decided to continue with the institution of textiles committee, a statutory body.

The committee was constituted by an Act of Parliament in 1963 to ensure quality of textiles and textile machinery for internal consumption as well as exports.

The industry has been demanding the abolition of the cess for a long time. “The amounts collected have been several times higher than the funding requirements of the textile committee. The interest on excess funds collected so far will be more than sufficient to fund all current activities of the committee. The proposal would have a positive impact on the entire textile industry,” Confederation of Indian Textile Industry secretary general DK Nair said.

Expenses of the committee is stated to be about Rs 5 crore. Most of the government grant is being returned, sources said. The committee also earns considerable amounts as consultancy fees.

According to textile committee sources, it has collected Rs 52.65 crore as cess in ’05-06. The cess, collected by the committee, is deposited in the consolidated fund of India and a grant is released to the committee for its functioning.