Kochi: Exporters in the textile and marine sectors are seeking budget support to tide over the crisis that these industries are facing because of the appreciation of local currency against the US dollar.
The list of demands is long, ranging from concessions for import of machinery with higher depreciation rate to exemptions for payment of fringe benefit and service taxes. However, the plantation sector does not have too many demands.
The knitwear industry in the textile town of Tirupur in Tamil Nadu, which is facing the brunt of an appreciating rupee, has so far seen a 10% decline in exports.
A. Sakthivel, president of the Tirupur Exporters’ Association (TEA), says knitwear exports from Tirupur, home to more than 2,000 units employing at least 350,000 workers, has clocked more than 10% decline in exports from April to December, from Rs8,500 crore during the year-ago period.
In a pre-budget memorandum to the finance ministry, TEA says the Union Budget should raise the depreciation rate on plant and machinery to 25%. In fact, this was the level earlier and was brought down to 15% in the 2005-06 budget.
Machinery used in garment industry needs frequent technological upgrades and the normal lifespan of equipment is not more than four years. The Budget could also look at a depreciation rate of 50% for the industry, it adds.
The imposition of the fringe benefit tax on sales promotion expenses, including publicity, tours and travels, room and board, and free samples have affected exports and all expenses related to exports should be exempted from this tax, TEA says. The 12.36% service tax, being paid on travel and commission to agents, has pushed up export costs. Even rentals fall under the service tax ambit. Hence, the sector ought to be exempted from all service taxes, the memorandum says.
The current 11% duty drawback—the rebate on duty for imported materials required to manufacture or process goods for export—is not sufficient to offset the impact of the appreciation of the rupee because the local currency has appreciated about 15% in the last one year. So, the exporters say, the duty drawback should be raised by at least 4%.
The exporters have also sought higher budget allocation for the technology upgradation fund scheme to ensure adequate reimbursement.
Faced with a serious labour crunch, the industry also is demanding an extension of the rural employment guarantee scheme to the garment sector.