CII's national committee on textile, which has top textile companies as members, met here on Wednesday and supported the imposition of ad-valorem duty. It also decided to launch a media campaign to create awareness about the advantages of the duty structure on independent processing units, a committee member and Bombay Dyeing executive director (textiles) Prem Malik told The Financial Express.

"Any rollback in duty structure proposed in the Budget for the textile sector will hamper the government's move to complete the (value added tax) VAT chain. In fact, duty anomalies in textile sector was the major road block to move to a full VAT chain," a spokesperson of Confederation of Indian Industry's (CII) added. "Finance Minister Yashwant Sinha in his Budget had clearly mentioned that the special scheme of charging excise duty from independent textile processors on compounding basis had resulted in `serious distortions' which had forced him to revert to the ad valorem," Mr Malik, quoting Mr Sinha's budget speech, said.

According to an estimate, the Centre will gain Rs 4,000 crore by shifting from chamber-based compounded excise duty (stenter duty) to ad valorem duty, Mr Malik said.

According to estimates, composite units processes 1,423 million sq mt out of which about 800 million sq mt is being exported. The balance 623 million square meter used for domestic market attract a duty of about Rs 325 crore.

The powerloom sector, on the other hand, produces about 23,180 million square metre of textile, out of which 21,426 million sq mt is consumed in the domestic market. While 7,700 million square metre of the domestic market is processed by hand processors the balance 13,700 million sq mt is processed by independent units.

Assuming the average price at Rs 25 per metre, the total value of the product processed by the independent processors stands at Rs 34,000 crore, which would, at 16 per cent ad valorem, attract a duty close to Rs 5,440 crore. After allowing CENVAT credit of an average 35 per cent (25 per cent on cotton fabric and 45 per cent on synthetic fabric), the total duty comes to Rs 4,000 crore, Mr Malik said.