Ficci today responded to the Prime Minister’s appeal not to resort to retrenchment in the face of the current economic meltdown by throwing the ball into the government’s court. It asked for a bailout package for the labour-intensive textile sector to head off massive job cuts.
Pointing out that growth of the textiles industry has come down from eight per cent in 2005-06 to merely 0.8 per cent in April-August 2008-09, Ficci warned of large-scale lay-offs if the government did not implement swiftly a special package for the industry.
It said that the profitability of Indian textiles industry fell by over 99 per cent in June 2008 quarter and investment in the current year (for April-July) dipped by 66 per cent compared to the year-ago period.
Therefore, a special package has become imperative to save the industry from the current economic crisis, Ficci argued. It also favoured moratorium for one year on term loans and increased drawback rates along with export credit at international rates for the textiles industry.
Extension of sunset clause for export oriented units (EOUs) for five years, release of pending funds of last year under Technology Upgradation Funds Scheme (TUFS) and reduction of excise duty on man-made fibres are some of its other demands. Under the sunset clause, EOUs are entitled for income tax exemptions for a period of 10 years that is expiring by March 2009.
The industry body contended that given the profitability position of textile industry currently, it would not be right to withdraw this benefit next year as a result of which tax for EOUs would be around 34 per cent after expiry of the benefit.
It also demanded imposition of 10 per cent import duty on man-made fibres; and sought seven per cent duty free scrips as a refund of state taxes.