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Tech | November 2019

Textile bodies hail financial measures to boost economy

Indian textiles and clothing industry, the second largest employment provider (around 11 crore people) next only to agriculture was the second largest exporter in the world during 2017, now it has slipped to 5th position due to global recession especially in the aftermath of US-China trade war and the tariff concessions extended for the competing Nations like Vietnam, Bangladesh, Pakistan, etc. Realising the need for reviving the Indian economy, the Government is taking certain measures on a war footing including significant reduction in the corporate tax rate, extending certain export benefits like MEIS for the textile industry till December 31, 2019. But the textile industry continues to suffer due to various external factors and the spinning segment is the worst affected as the cotton yarn export has declined over 35 per cent during April-August 2019 when compared to the same period in the previous year, a higher domestic cotton price and sluggish domestic market. Certain measures are urgently required to revive the ailing textile industry, make it globally competitive, sustain the jobs of millions of people across the country and achieve its potential growth rate.

In a press meet organised by the national and regional textile industry bodies—Confederation of Indian Textile Industry (CITI), Cotton Textiles Export Promotion Council (TEXPROCIL) and The Southern India Mills’ Association (SIMA)—have thanked the NDA Government led by Narendra Modi, Prime Minister; Niramala Sitharaman, Union Finance Minister; Piyush Goyal, Union Minister for Commerce & Industry; and Smriti Zubin Irani, Union Textile Minister for taking several initiatives including reduction in the rate of corporate tax, extension of MEIS and RoSL benefits up to December 31, 2019 and also for announcing a new scheme, remission of taxes, duties on export products (RoTDEP) with effect from January 1, 2020 to ensure refund of all taxes and duties on exports and make the Indian exports competitive in the global market.

T Rajkumar, Chairman, CITI, stated that the textile industry bodies in the country have appealed the government to announce the following slew of stimulus measures that are under active consideration of the Government:

Release of government dues: The Indian textiles and clothing industry is currently facing severe liquidity crisis mainly due to the huge accumulation of government dues especially TUF subsidies amounting to Rs 11,000 crore and RoSL/RoSCTL arrears since March 7, 2019 and GST refund. It is essential to release the government dues on a war footing to enable the industry to ease its liquidity crunch.

Debt restructuring for MSMEs: Extend one-time restructuring of existing loans of the textile and clothing sector on the similar lines as given to the MSMEs. However, as the textile industry is a capital-intensive industry, it is requested that there should be no cap to a borrower as has been extended in the case of MSMEs, i.e., Rs 250 million as on January 1, 2019. It is requested that MSMEs debt restructuring package may be extended for the entire textile industry as this would save many companies from turning into NPAs.

E-auctioning of CCI MSP procured cotton: Consequent to the 26 to 28 per cent increase in the minimum support price (MSP) for cotton effected for the cotton season 2018-19, Indian cotton has become expensive when compared to the international cotton price, making Indian cotton and its textile products uncompetitive in the international market. This has resulted in sizable increase in imported cotton during the current season. Country is likely to end with over 50 lakh bales closing stock for the current season due to reduced exports and increased imports and Cotton Advisory Board estimated the closing stock to be 40.41 lakh bales. The favourable monsoon and weather has made the cotton farmers to choose cotton as the attractive crop with another Rs 100 per quintal increase in MSP.

The area under cotton for the next season has already exceeded when compared to the area covered under previous season, anticipating huge gap and minimum support price, the government has already provided Rs 2,000 crore for MSP operations. CCI is geared up to procure around 100 lakh bales in the coming season and the volume is likely to increase if the current forecast of international price remain the same during the peak season of Indian cotton. In the past, CCI has been avoiding sale of MSP cotton and making it expensive that greatly affected the performance of the cotton textile industry. Therefore, for the coming season, it is essential to come out with a cotton policy that enables CCI to sell its MSP procured cotton on a regular basis at 5 cents lower than the international price during the peak season to avoid accumulation of stocks with exception to the actual users and also make the cotton available at international price during the off season. Adequate funding has to be provided by the Government at NABARD finance rate or under priority lending rate to reduce the carrying cost and minimise the losses incurred by the CCI to create win-win strategy for all the stakeholders in the cotton textile value chain especially the farmers and the industry.

Inclusion of cotton yarn under RoSL, MEIS & IES and fabric under RoSL benefits: The cotton spinning sector is currently facing an unprecedented crisis due to excess production capacity to the tune of seven million spindles created taking advantage of the incentives offered by the Textile Policies of different States like Gujarat, Maharashtra, Andhra Pradesh, etc. The cotton yarn consumption in the domestic market got stagnated during the last four years. Over 35 per cent fall in yarn exports in the recent months have aggravated the situation.

The average cotton yarn exports per month that prevailed over 120 million kg during 2013-14 has now dwindled down to less than 60 million kg due to US-China trade war and duty-free access enjoyed by Vietnam and other countries in the Chinese market. The sluggish demand has severely affected the cotton farmers as the country is left with excess cotton production. The situation is likely to worsen in the coming year even though the Union Budget has already provided Rs 2,000 crore for MSP operation. Hence, it is very essential to boost cotton yarn exports in the interest of over 15 lakh people employed in the spinning sector, millions of cotton farmers and avoid over 3,500 spinning mills (predominantly MSME units) becoming NPAs and prevent job losses for several lakhs of rural masses especially women. Extending export benefits for cotton yarn will not affect the garment or made-up segments as the country is left with huge surplus spinning capacity and surplus cotton.

Including fabrics under RoSL benefit is essential to encourage fabric nomination business of global brands and boost powerloom/handloom fabric exports that has been stagnated during last several years and still struggling with huge surplus production capacity.

Under the RoTDEP, a new export benefit scheme will come into effect from January 1, 2020, where cotton yarn has been singled out. Cotton spinning sector, being highly capital intensive, is currently left with over seven million spindles surplus capacity. It is essential to include cotton yarn also under the new scheme that would greatly benefit millions of cotton farmers, spinning sector and enable the spinning sector to constantly modernise and meet the growing demands of the downstream sectors and sustain its growth.

Export credit: Extend export credit facilities for all the textile products in the textile value chain including cotton yarn to have a competitive edge in the global market.

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