Sunday, March 08, 2015

"Make in India" vision of Prime Minister Narendra Modi has literally been put to rest by the Finance Minister, in this budget proposals for FY16 as far as textile sector is concerned; when he increased the  service tax to 14% in one stroke. According to experts this will have an adverse impact on the textile industry. 

Meanwhile, the continued fall in crude oil prices over recent months has led to domestic synthetic yarn makers incurring stock and margin losses. Moreover, the fall in prices of petrochemicals, including key polyester yarn raw material such as monoethylene glycol (MEG) and purified terephthalic acid (PTA), has forced yarn makers to reduce prices.  

Adding to the problem for synthetic yarn makers is the sluggish demand from mills. Yarn prices have fallen by ~25% in two last few months.

In midst of all these unfortunate events, the hike in effective rate of excise duty on manmade fibres from 12.36% to 12.5% under the current Budget came as a bolt from blue and will definitely hit the Textile sector hard. 

Moreover, fresh investments will be difficult under the Technology Upgradation Fund Scheme (TUFS) during 2015-16, owing to reduction in allocation for the scheme from Rs.1864 crore in 2015-15 to Rs.1520 crore for 2015-16. 

Only silver lining seems to be: extending the optional Cenvat route for cotton textiles and announcement of implementing GST with effect from 1 April, 2016.
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