04 August 2023, Mumbai
The spinning industry in Ludhiana, a major employment generator in the city, is currently facing a significant crisis due to duty and tax irregularities.
According to Gagan Khanna, the chairman of Arisudana Spinning Mills Limited, the inverted duty structure on MMF (Man-Made Fibre) chain is causing a major issue.
Industry leaders seek removal of import duty
Raw materials like viscose and polyester staple fibre are taxed at 18%, while the yarn is taxed at 12%. This disparity results in a considerable accumulation of GST refunds, leading to a blockage of working capital, an inability to take GST credit on capital goods, and a time-consuming and cumbersome process for obtaining refunds.
Trade pacts
Khanna also pointed out that polyester staple fibre is not covered under the ASEAN FTA (Free Trade Agreement), whereas polyester spun yarn is included.
This lack of inclusion leaves domestic producers with no chance to compete with finished goods in the market.
Kamal Oswal, the vice-chairman of Nahar Group, highlighted the negative impact of the 11% import duty on raw cotton, which was imposed in October 2021. This duty has rendered the entire Indian cotton spinning industry unviable.
Level playing ground
Domestic prices have been on average 10% higher than ICE future prices since the introduction of this duty, resulting in a significant decline in exports, the closure of spinning mills, and a substantial loss of employment and export revenue.
In response to these challenges, the industry leaders have approached Rajya Sabha MP from Ludhiana, Sanjeev Arora, seeking his support in addressing their concerns with the government.
They hope that he can help find solutions to sustain the existing industry and attract fresh investment in the textile sector.
Call to action (CTA)
The industry leaders are urging the government to take specific actions, including removing the 11% import duty on raw cotton, including polyester staple fibre in the ASEAN FTA, and implementing the BIS (Bureau of Indian Standards) standard on polyester spun yarn.
They firmly believe that these measures will revitalize the spinning industry in Ludhiana, create more jobs, and drive economic growth in the region.
