While Union Finance Minister P Chidambaram in his last Budget provided special incentives and relief to the textile sector by abolishing Cenvat and removing mandatory excise duty on pure cotton, wool and silk to boost textile exports in the post-quota regime, this year's Budget is likely to appease the textile sector even further. Gujarat is the leader in the textile sector in the country.

Speaking to Business Standard and outlining the sops that are likely to be given to the sector, Union Textiles Minister Shankarsinh Vaghela said that further rationalisation in the duty structure to provide a level playing field to the Indian textile industry in the international market through various subsidy and incentives schemes is likely to be announced.

"Our ministry has called for a meeting on February 14, which will be attended by the finance secretary and the revenue secretary among others to discuss special incentives and subsidy schemes to be provided to the textile sector. We plan to further rationalise the duty structure to bring the Indian textile industry at a level playing field and become internationally competitive." Vaghela said.

He was in Ahmedabad to attend a pre-budget discussion on textile industry at the Gujarat Chamber of Commerce and Industry.

The ministry proposes to rationalise the duty structure on man-made fibre, dereserve 26 items under the small scale industries sector, which would include the knitwear segment among others, to introduce new subsidy and incentive schemes to make the sector internationally competitive, to establish 25 apparel parks and textile clusters and to further make the technology upgradation fund more flexible.

"The ministry plans to enhance its role as a facilitator for setting up over 25 apparel parks and over 25 textile clusters in the country. The ministry has decided to club the apparel park scheme and textile centre infrastructure development scheme to create a new fund to provide assistance of up to Rs 50 crore (Rs 500 million) for setting up new apparel parks in the country. We are planning for rationalisation of the duty structure on man-made fibre over the next five years," said Vaghela.

For making the TUF scheme more flexible, the ministry has planned to add three per cent interest subsidy for investments in the processing sector apart from extending the date of closure of the Technology Upgradation Fund up to March 31, 2007 on the basis of response of the overall textile industry during the last one year and on the basis of demands from most of the textile associations of the country.

What the industry wants

• Mandatory excise duty on man-made staple fibre to be reduced to 8% from the current 16%
• Mandatory excise duty on polyester filament yarn may be reduced to 16% from 24%
• Dereservation of 26 items under the small scale industries sector, including the knitware segment
• Creation of a special fund, clubbing the apparel park scheme and textile centre infrastructure development scheme to provide assistance of up to Rs 50 crore
• Enhancement of the up-front subsidy for SSI sector under TUF Schemes from 12% to 15% per cent
• Credit linked capital subsidy under TUFS up to investment of Rs 60 lakh may be enhanced to Rs 1 crore