Plan panel opposes tax benefits for imported textile machinery
September, 20th 2006
The Planning Commission is against a proposal to extend fiscal sops for importing second-hand textile machinery. It is of the view that any such incentive would bring in obsolete technology to the country.
The proposal to allow a 5% interest waiver under the Technology Upgradation Fund Scheme (TUFS) to textile firms purchasing old machinery from abroad was mooted by the textile ministry.
The ministry has demanded interest waiver as it would enable the import of affordable technology at the time when there is a shortage of textile machinery. The interest waiver is expected to encourage domestic firms to import used machines and equipment.
But the Planning Commission feels that such an assistance will make India a junkyard of old machinery, government sources said. Therefore, the firms importing machinery will get no financial assistance from the government.
The proposal for providing financial assistance for imported machinery was discussed at the Inter-Ministerial Committee meeting. According to sources, the textile ministry has also suggested a cap of five years on old machinery to ensure good quality imports.
With few companies producing textile machinery, at present India imports most of the machinery from Europe or America.
According to analysts, imported machinery is twice as costly as Indian machinery. So the textile ministry has been planning to promote the imports of second-hand machinery, which is affordable.
Any move against an interest waiver would further restrict expansion of spinning capacity of Indian textile firms that are facing a stiff competition from China, said DK Nair, secretary general, Confederation of Indian Textile Industry.
India has been lagging behind China as far as exports of finished textile products are concerned. The interest waiver was expected to enhance the production and exports of finished products.
Analysts believe that since textile machinery, spindles for instance, has a life span of about 25 years, it makes sense to import 5-8-year-old machinery at a cheaper cost. India is already a major importer of textile machinery from Europe and America. Surpassing Turkey and China, India has become the largest importer of Swiss textile machines in the current year.
Meanwhile, some European firms have already shown interest in setting up bases in India. For example, Sulzer and Rieter, the Swiss leaders in machinery, and Picanol, the Belgian machinery manufacturer, are in the process of setting manufacturing bases in India, industry sources said.