The introduction of zero excise for the sector is expected to help it to brace for the post-multi fibre arrangement (MFA) by attracting more investment, officials and textile industry sources here said yesterday.

The move could also help simplify the complex structure and process of excise duty for the textile sector which has not really helped the vital sector, they said.

The previous BJP-led NDA government did grant excise duty exemption in the last two budgets at various stages of the textile value addition stage but the whole process turned out to be cumbersome and compliance of duty payment was a problem due to administrative reasons, they pointed out.

The Indian textile sector is in urgent need of getting extra cutting edge in view of the pressure of falling prices of products from China before the quota-free regime goes into effect from January 1, 2005, industry sources said.

This was the view with which some Indian textile suppliers to the European and American market returned recently after attending a meeting of buyers and sellers in the United States.

Leading international textile and garment retailers like the Wal Mart and J C Penney are reportedly pressing for a reduction of Indian textile products as the Chinese are bringing down the prices of their products to help build up stock after the quota-free regime is dismantled, industry sources pointed out.

Some top retailers are banking on Indian products as an alternative source as they do not want rely solely on China particularly in view of threats of return of SARS disease which had rocked that country and South East Asia recently.

Meanwhile, Indian exporters are looking forward to the coming budget for restoration of the cent percent exemption of corporate tax on export profits. The exemption was abolished in the previous budget.

Commerce and Industry Minister Kamal Nath has taken up with Finance Minister P Chidam-baram the exporters' demand for 100 percent tax exemption on export profits in order to improve India's export competitiveness.

The income tax holiday for exporters was first introduced during the rule of Congress government headed by Rajiv Gandhi between 1984 and 1989 which is considered the golden age of Indian exports with exports recording an average rise of 19 percent in dollar terms.

Finance Ministry officials are believed to be assessing the impact of possible restoration of cent percent tax exemption of export profit in the light of the implications of the existing duty-exemption facilities for the exporters.

At present, cent percent export-oriented units and units in special economic zones and software and hardware technology parks enjoy tax holiday under relevant sections of the Income Tax Act and the coming budget is unlikely to tinker with it.

The Finance Ministry is taking a hard look at all duty and tax exemption scheme with the twin yardsticks of assessing their utility in the current scenario as well as commitment to bilateral and multilateral treaties.

If that was to happen, zero customs duty rate would continue on many imports because India would not like to dishonor treaties like Information Technology Agreement and zero-for-zero tariff accords to allow duty-free imports.

Exporters have been encouraged by the new Indian government's decision to liberalise the Duty Entitlement Pass Book (DEPB) scheme for them from June this year.