The Union Budget 2004-05 will be crucial for the textile sector as it would have to provide for measures to enable the industry to gear itself to face challenges and competition after the dismantling of Multi-fibre Agreement this year-end.

"This Budget will be the toughest for textiles. As pulls and pressures mount, the battlelines will be drawn...(whether) politics wins or economy prevails in this fight will decide the fate of the sector post-MFA," joint secretary in the ministry of textiles Atul Chaturvedi said at an 'Apparel Manufacturing Summit'.

Since the entire textile sector was brought under CENVAT there have been protests by those who were out of the chain earlier. As the time for the presentation of the Budget draws closer, the lobbying on both sides of the divide, those who are in favour of CENVAT and those against it, has gained momentum.

Chaturvedi conceded that one of the biggest issues the textile ministry is grappling with in the midst of budget making exercise is CENVAT.

He said that any major tinkering with the tax structure in the textile sector when just six months were left for the phasing out of quota regime would prove disastrous for the industry.