Indian textile industry hails budget with some scepticism
today Feb 2, 2018
Textile associations in India have welcomed the raised allocation for the sector in this year’s budget, saying it will help firms in many ways, including clearing pending rebate of state levies (RoSL) dues. The drop in corporate tax rate for units with an annual turnover of up to Rs 250 crore will benefit most textile units, they feel, with some scepticism.
The associations, which include the Southern India Mills’ Association (SIMA), Coimbatore-based Indian Texpreneurs Federation (ITF), the Confederation of Indian Textile Industry (CITI), the Tiruppur Exporters Association (TEA), the Cotton Textiles Export Promotion Council (TEXPROCIL) and the Clothing Manufacturers Association of India (CMAI), also welcomed the increased allocation for infrastructure development and the focus on agriculture, and saw a lot of incentives for micro, small and medium enterprises (MSMEs).
The National Livelihood Scheme of Rs 5750 crore will benefit the textile sector in rural areas, according to CITI chairman Sanjay Jain.
The budgetary allocation for the textile sector has been increased to Rs 7,148 crore, which includes Rs 2,300 crore for the Amended Technology Upgradation Fund Scheme (ATUFS) of the textiles ministry, over Rs 6,251 crore last year.
ATUFS was introduced in 2015 specifically targeting employment generation and export, promotion of technical textiles, technologically upgrading existing looms and encouraging quality in the processing industry.
Jain feels a large part of the increase in allocation has gone to the state-owned Cotton Corporation of India (CCI) for performing minimum support price (MSP) operations and hence, won’t help the industry.
Not much has been said in the budget about concrete correctional measures to boost India’s export competitiveness in textiles or policies favouring a revival of textile special economic zones, said Bhavin Parikh, CEO of Ahmedabad-based Globe Textiles (India) Ltd.
Welcoming the scheme in the budget for MSMEs to address issues relating to non-performing asset (NPA) norms and stressed assets, a long pending demand of the industry, SIMA chairman P Nataraj said the reduction of corporate tax rate from 30 per cent to 25 per cent for units with an annual turnover of up to Rs 250 crore will benefit more than 80 per cent of the textile units and help them plough back the amount for creating more jobs and value addition.
Nataraj and TEA president Raja M Shanmugham, however, feel the allocation of Rs 2,164 crore for RoSL compared Rs 1,855 crore last year for the export of garments and made-ups is still inadequate as there is a huge backlog for 2017.
The RoSL scheme for apparel exporters came into effect from September 20, 2016, and the actual requirement for the apparel sector alone till March 31 this year is in the range of Rs 5,000 crore, said Shanmugham. TEXPROCIL chairman Ujwal Lahoti hoped the increased funds will cover fabrics as well under the RoSL scheme.
The 20 per cent higher allocation for infrastructure development shows the government’s thrust on renewing spurt in economic activity, according to GHCL Ltd managing director RS Jalan. CMAI president Rahul Mehta said infrastructural bottlenecks have been hindering apparel manufacturing, which involves significant domestic transportation of raw materials and finished goods.
Referring to the reduction of women employees' contribution towards the Employees Provident Fund (EPF) to 8 per cent for the first three years, many industry associations said apparel sector workers will be among the primary beneficiaries of this provision as the sector extensively employs women.
Although the rise in basic customs duty (BCD) on silk fabric to 20 per cent from 10 per cent would save the industry from dumping from China, the industry aspired for an increase in BCD across both yarn and fabric and therefore, is disappointed with this partial measure, CITI chairman Jain said.
The step to make the MSP of all crops 1.5 times that of the production cost will benefit cotton farmers, but will result in high inflation for consumers and the downstream segments and make the industry uncompetitive internationally, Jain added.
CITI urged the government to change from MSP to the direct subsidy system, so that the profit protection measure of farmers doesn’t impact the textile consumer and the value added industry.
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