Budget falls short on shoe industry hopes

Vishal Sharma
New Delhi/ Agra. The shoe industry of Agra has been hit hard by the Budget this year. The industry expected relief in tax rates.

While the 2 per cent increase in service tax rates shall make competition with China tougher in the export market, fur shoes will be cast out of the market due to a 10 per cent hike in the manufacturing cost.

Even the budgetary provision of 8 per cent reduction in the excise duty on shoes ranging from Rs 250 to Rs 750 has failed to provide relief to the town's ailing footwear industry.

According to Nazir Ahmed, managing director, Park Exports, the Agra brands would not benefit greatly from the reduction in excise duty as a large number of footwear units in Agra have a turnover of less than Rs 1 crore, which brings them out of the tax net. But, this tax rebate could help the larger Agra companies in entering the Indian market with a renewed vigour, he said.

He said that when the government was aware of the problems being faced by the footwear industry, it should have given some thought to reducing the Custom duty on raw material and import of machinery. The additional 4 per cent countervailing duty had effectively raised the cost of importing despite the apparent 2.5 per cent reduction in import duty, Ahmed said.

According to Ashok Jain, MD, Lyco Group, the fur shoe manufacturers had been the worst hit by this year's Budget as in the Rs 1,000-crore Agra footwear industry, almost 20 per cent of the footwear manufactured incorporated fur skins as accessories and the 8 per cent excise duty that had been re-imposed on fur shoes would raise the cost of these shoes by over 10 per cent.

He said if the government honestly wanted to give some relief to the footwear industry, it should have reduced excise duty on shoes ranging from Rs 1,000-1,500 as this was the range of shoes that was actually exported by the Agra footwear manufacturers and a reduction in excise duty on these shoes could have made the Indian shoes at least 10 per cent cheaper, which could have made a significant dent on the Chinese share in the European footwear market.

He said that the irrational tax rates imposed on the footwear industry would only serve to throw this industry out of gear in the international market and it could suffer a major setback in the future export orders.

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