Removal of 1% National Calamity Duty No Respite For Rupee-Hit, Sinking Industry
POLYESTER and nylon clothing are set to turn costlier by 2-3%. The imposition of 5% Customs duty on naphtha (an input for manmade fibres) is likely to push up prices of polyester textiles at a time the textile trade is reeling under the impact of rupee’s rise.
While naphtha has become costlier, the 1% national calamity contingency duty (NCCD) on manmade fabrics has been scrapped. Textile industry say the removal of NCCD would, however, have a marginal impact as it was a surcharge. “The abolition of surcharge will have no major impact, but the decision to slap import duty on naphtha is going to affect the industry adversely. It would also affect the industry’s competitiveness in the light of aggressive marketing by Chinese companies,” Confederation of Indian Textile Industry (CITI) director general DK Nair said.
Primary producers of polymers like Haldia Petrochemicals (HPL), Reliance Industries (RIL) and Gail use Naphtha as raw material. Polymer, in turn, is used in a host of downstream sectors such as plastics, paints and manmade fibres which will face margin pressures leading to escalation of prices. HPL has said it would have to Rs 300 crore extra for meeting the increased cost of naphtha. The duty on naphtha would also push up prices of plastic products by 2-3%.
“It looks as if instead of giving a bailout package to the textile industry, the finance ministry has levied a penalty on them. The industry would urge the government to allow duty-free import of naphtha at least for the use of textile industry,” Mr Nair said, adding the decision is untimely as naphtha prices are already escalating due to rising crude prices.
Textile companies may see an impact on bottom lines if they have to absorb the rising input costs (due to additional duty) and are unable to pass it on to consumers. The industry is already in the red because of the rising rupee. The sector has channelled a long wish list through the textile and commerce ministry. However, the finance minister preferred to remain silent on most demands. This is despite the fact that the Economic Survey had also acknowledged the hardship felt by the export community due to currency fluctuation.