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Trade Talk | November 2017

MMF exports showing signs of recovery: SRTEPC AGM

Narain Aggarwal, Chairman of the Synthetic & Rayon Textiles Export Promotion Council (SRTEPC), in his address at the 63rd Annual General Meeting held on September 28, 2017 in Mumbai said that exports of MMF textiles during the year 2016-17 had shown a nearly 2 per cent growth in value terms and was on path of recovery. He further added that although the growth has not been exceptional, it has been an improvement from the down slide the industry had experienced in the year 2015-16. He further observed that albeit the target set for the year 2016-17 by the Ministry of Textiles is a challenging one, efforts will be made by the industry to keep up the momentum of growth of exports of MMF textiles in order to achieve the export target.

According to Aggarwal, the year 2015-16 had been a particularly challenging year for the Indian man-made fibre (MMF) exports. He added that during the year, exports of Indian MMF declined by 8.34 per cent compared to the previous year to $5795.96 million and the decline was witnessed in all the product segments. Aggarwal was of the opinion that during these critical times there is urgent need for policy interventions to keep exports on the growth track. The Council has suggested some of the urgent measures to be taken in this regard to the Government including the Ministry of Textiles and Ministry of Commerce.

He informed that during his interaction with the Minister of Textiles, Smriti Irani to discuss issues related to the Foreign Trade Policy on July 24, 2017, he had put forth certain issues relating to constraints in export growth – International and National factors affecting competitiveness in exports. He mentioned that he had suggested that the MEIS Scheme should be continued as neighbouring countries have the advantage of GSP. He was hopeful that the Hon’ble Minister would take note to the proposed suggestions and take up the issues suitably with the concerned authorities in the mid-term review of the FTP.

He also mentioned that the Council has been recommending to the Government to include the remaining MMF textile items with suitable reward rates in all Country Group under the Merchandise Exports from India Scheme (MEIS) to boost the exports of synthetic and blended textiles from India. He said that the Council has recommended that in countries where anti-dumping duties have been imposed like Turkey, Peru; MEIS benefits may be given by way of including these countries under the MEIS. He pointed out that synthetic fabrics and technical textiles should also be included in the MEIS which have high global demand.

Speaking on the launch of GST regime, which he said was described as a “good and simple tax” that would end harassment of traders and small businesses and integrate India into one market with one tax, he said that the challenges in its implementation has affected business, at least as far as exporters are concerned.

He observed that the roll out of GST had brought about a lot of mixed reaction in the textile industry with the MMF industry bearing the maximum burden with high rates for raw materials of MMF than other fibres. Post implementation of the GST regime, there has been an overall blockage of working capital across the textile industry. The 18 per cent GST on spun, textured, fully drawn, warp and knit yarns and 5 per cent GST on fabrics with no Input Tax Credit (ITC) refund mechanism have created huge accumulation of unutilised ITC. This has left the huge embedded tax of 13 per cent (18 per cent - 5 per cent = 13 per cent), which needs to be compensated to exporters with at least 5 per cent duty drawback.

The Chairman also spoke about the critical issue of huge import of fabrics from China, especially in the post GST regime. He said that the import of most MMF particularly fabrics have become 13 to 14 per cent cheaper in real terms which he felt could result in closure of over 50 per cent of fabrics manufacturing units in textile hubs like Surat, Malegaon, Bhiwandi, Ichalkaranji, etc. He further added that no specific duties are imposed on the fabrics falling under Chapter 60 and hence, the imports of fabric from China are taking place under Chapter 60. He further stated that all other fabrics falling under other chapters attract specific duties. He requested the Government to impose a specific duty or an additional duty of 15 per cent on imports of fabrics.

Commenting on the Rebate on State Levies (ROSL) scheme, Aggarwal stated that he thanks the Union Minister of Textiles for introducing the ROSL Scheme, the much needed initiative for the first time, for rebating the substantial amount of State levies being paid by the exporters while manufacturing the exportable textiles. The ROSL scheme rebates the state levies such as state VAT/CST on inputs including packaging, fuel, duty on electricity generation and duties and charges on purchase of grid power. Currently, this scheme is available only for garments and made ups.

Moreover, he added that fabrics form 80 per cent of the made up value and 50 per cent of the garment value and the fabric Industry (weaving, processing and packing/grading) generates substantial employment in the textiles sector like garments and made ups and incidence of duties on fabrics are more. Therefore, he urged the Government to also include fabric exports in the ROSL scheme. The cushion if ROSL is extended to fabrics will help remove anomaly in the MMF exports.

Expressing disappointment at the announcement of the new duty drawback rates, Aggarwal informed that Government is well aware about the prevailing conditions in the textile industry that had been in the negative territory for more than previous two years and hence should have shown some more positive gesture by increasing the drawback rates. Aggarwal informs that current global competition is neck to neck and business margins in textiles are the thinnest than ever. If Government does not support the exporters letting them receive refund of the various un-rebated duties paid by them by way of compensating drawback rates, then exports are likely to fall further and more than 30 per cent of textile manufacturing units will be closed done. This will create both employment and foreign exchange crisis in the country.

He pointed out that there are still various taxes not adjusted with GST such as transmission charges, electricity duty, cross subsidy on electricity bills, water cess, green tax, local body taxes, road taxes, labour cess, etc. Average percentage of such blocked un-rebated State input taxes and duties is more than 5 per cent of FOB value of the textiles exported which should be compensated with revision of the duty drawback rates upwards to at least 5 per cent for fabrics and made ups and this will certainly help is generation of more employment, growth in production and exports and foreign exchange earnings.

Dwelling on the export promotion programmes of the Council during the year 2016-17, he mentioned that the Council had successfully organised exhibitions in various countries including exclusive exhibitions in Bangladesh, Myanmar, UAE, Ethiopia and Kenya, which went a long way in boosting exports to these markets.

Talking about the Council’s mega project – the Reverse Buyer Seller Meet – SOURCE INDIA in Surat, Gujarat, he said that the exclusive Buyer Seller Meet with a participation of 105 member companies including 39 participants from the small scale industries of the Council was a huge success. The two-day meet attracted over 1,200 visitors, he said.

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