'Restricting used capital goods imports to hit powerloom sector'

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Namrata Kath Hazarika | 25 Aug, 2012
Imposing restriction on imports of second hand capital goods will adversely affect the growth and modernisation of the powerloom sector, said industry experts.

"Actually in the case of shuttleless looms, the domestic looms are very slow and the new looms available in abroad are very costly. There are cheaper looms available from China but they are not good. Therefore, the powerloom sector would require import of second hand looms manufactured in Europe and Japan," said the Confederation of Indian Textile Industry (CITI), Secretary General, D.K Nair.

The government has recently said that they are considering to stop giving benefits under the Export Promotion of Capital Goods (EPCG) scheme for importing used goods. Under the scheme, the domestic manufacturer can now import capital goods at only 3 per cent customs duty, irrespective of the applicable duty rate.

Also, the domestic capital goods industry has forwarded representation to the Department of Heavy Industry (DHI) to impose restrictions on second hand imports of capital goods as it is affecting their business growth.

On this context Nair further added that any restriction on the imports of used capital goods would affect the fabric sector and further discourage the modernisation and consolidation of the sector.

"The fabric sector is the weakest link in the textile value chain and most of the production of fabric is in the powerloom," he added.

The Powerloom Development & Export Promotion Council , Vice Chairman, M. Duraiswamy also said, "People who are shifting to 'modernisation' of their units they will be affected if the government stop giving benefits under the scheme."

He said the units will have to pay higher taxes, which will make imports costlier for them. In this case, the entire amount for the import of tools and machineries have to be paid by the enterprises themselves which will naturally hurt the industry.

Moreover, the technology upgradation costs will also become expensive. In fact, people may stop upgrading it, Duraiswamy told SME Times.

According to a report, the industry estimates show that use of second-hand shuttleless looms constitute about 80% of equipment purchases in the textiles sector.

Opining further, the Apparel Export Promotion Council (AEPC), Chairman, A. Shaktivel said, "The government should only ban those machineries which are manufactured in India but the machineries which are not manufactured in India should not be banned."

The clothing industry only imports new machineries from Korea, Taiwan, China and Germany, so, there would not be much impact if this (ban on second hand capital goods) happens, he added.

The total capital goods imports are estimated to have crossed USD 40 billion at present.