“This would help preserve the magnificent textile tradition in West Bengal and Tamil Nadu and generate thousands of jobs in Rajasthan,” Mr Mukherjee said in his Budget speech.

Other measures, however, such as the restoration of the 8 per cent duty on man-made fibres and yarn from the existing 4 per cent went against the demand of textile players, who had asked for the duty to be removed altogether. The hike in the minimum alternate tax (MAT) is also projected to hit players in the sector.

Responding to the announcements, Mr R.K. Dalmia, Chairman, Confederation of Indian Textile Industry (CITI), welcomed the increase in allocation for TUFS. “Because of inadequate budget allocation, there has been a backlog of more than one year in disbursements of TUFS assistance… Reintroduction of 4 per cent optional excise duty for cotton textile products is also a welcome step since this would allow textile companies to use Cenvat credit on capital goods, dyes and chemicals, and packing materials,” he said.

On the negative announcements, Mr Dalmia pointed out that the hike in mandatory excise duty on man-made fibres, filaments and their raw materials would make fibres “even more uncompetitive than they already are”.

Increase of MAT from 10 per cent to 15 per cent on book profit will also have a negative impact, though very few companies in the textile sector are making profits right now, he added.

Echoing the sentiments, Vardhaman Textiles Ltd Chairman, Mr S.P. Oswal, said the levy of 8 per cent excise duty on man-made fibre and yarn was going to further aggravate the problems for the textile segment. He said the prices of man-made fibre and yarn will move up in view of the hike in excise duty.