Indian Federation of Textile Industry Calls for Cancellation of Artificial Fiber Import Tariffs

In its pre-budget proposal, the Indian Federation of Textile Industry (CITI) emphasized the importance of removing import duties on artificial fibers for the textile sector. The group argued that eliminating these tariffs would allow manufacturers to purchase raw materials at competitive prices, thereby improving cost efficiency and boosting production capacity. Man-made fibers currently account for a significant portion of global textile production, with India’s consumption ratio standing at 14% for man-made fibers compared to 59% for cotton in fiscal year 2009—far below the global average of 60% man-made and 40% cotton. CITI pointed out that this imbalance is particularly evident in India's textile and apparel exports, where the proportion of man-made fibers remains low. To address this, the industry believes that increasing the use of man-made fibers is essential, which can only be achieved by ensuring stable and reasonable fiber prices. The organization also proposed introducing an optional 4% uniform consumption tax on all textile products, regardless of their fiber content. This measure, they believe, would simplify taxation and provide more flexibility to the industry. In addition, CITI called for the abolition of all anti-dumping duties on man-made fibers and urged the government to stop initiating new anti-dumping actions. Such steps, according to the federation, would encourage greater domestic consumption of synthetic fibers and support the growth of the textile sector. According to a report from the Ministry of Textiles, global trends suggest a growing preference for man-made fibers due to the limited expansion of cotton cultivation. With agricultural land increasingly being diverted to food crops, the availability of cotton is expected to shrink, further increasing the demand for synthetic alternatives. India’s man-made fiber production capacity was estimated at 3.4 billion kilograms in 2009, representing about 6% of the global total. However, export performance showed a decline, with man-made fiber exports falling to $2.2 billion in April–November 2010-11, down from $2.4 billion in the previous period—a drop of nearly 8%. Despite this, the government has set a target of $7 billion in man-made fiber exports by 2014. Beyond these challenges, the textile and garment industry faces additional hurdles, prompting CITI to recommend a one-time refund of accumulated central VAT credits for textile companies. They also suggested exempting textile firms from import duties and consumption taxes on liquid fuels used for power generation. Machinery used in the sector, except for ring spinning machines, should also be eligible for duty exemptions and tax relief. Furthermore, new technical reform projects should be fast-tracked, with adequate funding allocated for current and future initiatives. To support the cotton supply chain, the government could offer loans at a 7% interest rate for next year’s cotton purchases, compared to the current 10% margin and 9-month repayment period. Once the consumption tax is applied, fabric should no longer be subject to state-level value-added taxes. Finally, CITI recommended reinstating the DEPB (Duty Entitlement Pass Book) and tax rebate policies for cotton yarns while restoring other textile tax rebates to their original levels. The group also proposed categorizing technical textiles as a separate group, allowing them to benefit from consistent DEPB and tax rebate rates. These measures, if implemented, could significantly strengthen India’s textile industry and position it for long-term growth.