Textile associations in Tamil Nadu have urged the government to tighten up loopholes in the excise chain which it says encourage evasion.

Mr Manikam Ramaswami, chairman of the Southern India Mills Association (SIMA) said loopholes - such as the fact that powerloom fabric does not have any duty and processed fabric has three types of duty - give rise to evasion.

Now the textile associations have called for a tightening up in the procedure and more checks to be made to cut down on the amount of room for error.

According to the SIMA, the government should collect Rs1,300 crore yarn duty every year and pay back Rs 1,100 crore through duty drawback.

But figures show that the government was paying back Rs 1,100 but only collecting Rs 650 crore.

The association said yarn duty was a big area for evasion and accounted for around 57 per cent evasion.

Among other areas for concern were woven fabrics which do not attract any excise duty but has duty levied on all processes that follow.