Increased allocation under TUFS, extension of excise duty cut on garments

Key budget proposals:

• For 2014-15, budgetary allocation under the Technology Upgradation Funds Scheme (TUFS) increased to Rs 23 billion from the revised estimate of Rs 19.5 billion in 2013-14 .
• The zero excise duty on readymade garments (RMG) continued for 2014-15.
• Duty-free entitlement for imports of trimmings, embellishments and other specified items increased from 3 per cent to 5 per cent of the value of their exports. Rs 2 billion allocated to set up six new mega textiles clusters; support also extended to the handloom sector Basic customs duty on reformate (feedstock for polyester) is lowered to 2.5 per cent from 10 per cent.
• Increased allocation to TUFS will continue to encourage capex. We expect spinners to add 1.0-1.5 million spindles in 2014-15. Domestic demand for RMG is expected to pick-up further to 5 per cent in volume terms in 2014-15 (from ~4 per cent in 2013-14). Continuation of zero excise duty will aid growth. Support extended for the development of mega textiles clusters and the handloom sector is a positive and will increase job creation. Duty reduction on reformate is likely to bring down polyester prices and improve demand marginally.