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Cover Story | March 2018

Special package to boost textiles exports

The special package was raised considering the fact that there were blockages of funds in previous year as very few GST refunds were cleared between July and December, says Avinash Mayekar.

On February 1, 2018 every individual, business entrepreneur like me was either stuck to their televisions or to online live telecast having all their desires and dreams hanging on the threads of hope. I was waiting anxiously for the Finance Minister Arun Jaitley to announce the Budget for FY2018-19. Although it’s a usual phenomenon every year, but this year the hopes and aspirations were to some extreme levels as it was the last budget for the current tenure of prevailing the government. I was in dilemma whether Jaitley will think of textile Industry or totally ignore one of the oldest industries.

Budget is a single word that will basically decide the roadmap for coming year. So speaking of the current year’s budget will not be a skeptic on whether the government has allotted the budget to please its voters for coming elections or not? As we all know every ruling party is bound to do it during the end of their tenure. So in this year’s budget there were huge overflows of budget across various sectors like healthcare, agriculture and women empowerments. But being a textile and food consultant, my entire focus during the outlay was only on the budget that is allotted to textiles and food, quite natural phenomenon, I would say as every individual concentrates only on the source of its bread and butter.

The budget for textile industry has been increased from Rs 6,251 crore (in 2016) to Rs 7,148 crore for FY 2018-19 so in percentage terms an increase of 14 per cent. Knowing the fact that current government is of the opinion that an industry must survive on its own, I was having least expectations of any additional funds for supporting textile industry.

This textile budget was further mapped into different segments by the Ministry of Textiles. The Ministry, knowing the problems and difficulties faced by the textile entrepreneurs due to the fact of inclusion of GST in the last year and post demonetisation stress, has made a few special packages. One of which is export package for apparels. The minister has allotted amount of Rs 71.48 billion for apparel sector to boost exports, which was only Rs 60 billion in 2016. This special package was raised considering the fact that there were blockages of funds in previous year as very few GST refunds were cleared between July and December. Also the dollar rate was reduced from Rs 65 to Rs 63 hurting exporters further. All this made Indian players uncompetitive in the global market and Bangladesh has also started en cashing on this by offering its products 10-15 per cent cheaper.

So this special package will help to boost the textiles exports from India and the growth rate is anticipated to be between 10 and 12 per cent in the fiscal year 2018-19.

The budget for amended TUFS has been increased to Rs 2,300 crore in current year from Rs 1,956 crore in 2017-18, but it is lower as compared to the allocation of Rs 2,622 crore made in 2016-17. Textile infrastructure development has been allocated Rs 2,223 crore as against Rs 1,931 crore in previous year indicating that the ministry is keen to support the infrastructure upgradation for textile units, this is further subdivided wherein the integrated processing development scheme is allotted Rs 3.8 crore, SITP (scheme for integrated textile park) is given Rs 30 crore, Remission of State Levis (ROSL) is allotted Rs 2,164 crore, Pradhan Mantri Paridhan Rojgar Protsahan Yojna is allotted Rs 10 crore and other schemes under infrastructure development have been allotted Rs 15.16 crore.

The budget for handloom development programme has been decreased from Rs 470 crore to Rs 396.1 crore. It is further bifurcated, wherein the handloom weavers association is been allotted Rs 19 crore, handloom yarn supply scheme has been given Rs 150 crore, Rs 35 crore for handloom mega cluster development and the remaining Rs 192 crore for other handloom development programmes. Supporting the traditional textile industry, the government has also allotted Rs 198.4 crore for the handicraft development programme.

To boost and develop the other textile fibre industry, the government has allotted budget of Rs 11.45 crore for woolen textiles, Rs 510 crore for silk textiles and Rs 28.14 crore for the jute industry. In order to protect the cotton growers, CCI (Cotton Corporation of India) has been allotted a huge budget of Rs 1,956 crore more than six times as it was Rs 302.7 crore in 2017-18 for procurement of cotton by CCI under MSP. This is an initiative to protect income of farmers and safeguard the cotton prices during adverse market and climatic conditions.

PowerTex India Scheme, launched last year, will drive the growth of powerloom sector this year. A budget of Rs 87.15 crore is been allotted for this scheme in this year. This scheme will be helpful for the decentralised powerloom industry across various clusters. Powerloom Mega Cluster development would also be continued in the coming year with a budget allocation of Rs 25 crore.

The flagship programme of the new government to enhance the skill sets of the workforce making them efficient for smarter tomorrow has received a greater response and has helped the growth of labour-intensive textile sector. In view with the programme, the Ministry has announced an increased fund of Rs 200 crore as against the Rs 100 crore sanctioned last year for Integrated Scheme for Skill Development for the textile sector. This scheme is operational since the last seven years.

For R&D in textile, the budget of Rs 11 crore is announced. The National Institute of Fashion Technology has been allotted Rs 30 crore and for other schemes pertaining to R&D, skilling and capacity building has been allotted a sum of Rs 11.09 crore.

In order to promote the usage of geotextiles and agrotextiles in the northeast region, a fund of Rs 15 crore and Rs 7.6 crore has been allotted respectively. Additionally an amount of Rs 90 crore is allotted for northeast region textile promotion scheme.

The Ministry has also reserved an amount of Rs 78.85 crore for establishment expenditure of the centre. Basic custom duty on silk fabric is increased from 10 per cent to 20 per cent to protect the domestic industry. The Government will also abolish the education cess and secondary and higher education cess on imported goods, and replace it with social welfare surcharge, at the rate of 10 crore of the aggregate duties of customs.

The other satisfactory and welcoming note during the budget announcement was the reduction in corporate tax to 25 per cent. Earlier, the slab was for those firms whose annual income was less than Rs 50 crore as in FY2015-16, this benefit is now been extended to companies that reported a turnover up to Rs 250 crore in FY2016-17. This move will benefit the textile industry which is having a large number of SMEs.

Apart from the major budget bifurcation, the textile industry has also welcomed the extension of fixed-term employment to all segments which was earlier only for apparel and made-ups segments. The Government has also continued the Pradhan Mantri Paridhan Rojgar Protsahan Yojna (PMPRPY) contributing 12 per cent towards EPF of new employees and its applicability has been extended for next three years. This will assist in hiring more workers in the apparel industry. Paid maternity leave period has been extended from 12 weeks to 26 weeks thus supporting the women workforce in the industry.

Conclusion

After the initial outlay of the textile budget, I feel that the Ministry has justified the amount allotted to its pocket. If we compare the current budget allocation with last year’s budget, we can understand that the government is rightly taking decisions in the favour of cotton-based industry and at the same time giving major thrust in the interest of Indian textile industry to boost the weak links. Overall a balanced budget allocation among the internal sub segments of textiles. However the assistance of this budget for growth of the sector in domestic and international market depends on the proper and easier allotment of the funds to the industry entrepreneurs. The pace of execution of this budget will be the deciding factor for the shinning future of textiles. It is only fair from the Industry to be satisfied with what is allotted and encash every penny of support that is been given by the Government.

Also this budget has opened the door for investments in other sectors specifically food. The budget allotted for food processing sector is getting an increase of as high as 96 per cent from Rs 715 crore in FY2017-18 to Rs 1,400 crore in FY2018-19 under the Pradhan Mantri Kisan Sampada Yojna (PMKSY). This will also facilitate cotton-growing farmers to get financial relieve and will boost their moral for increasing yield and acreage of cotton instead of unnecessary suicidal effects. The budget also mentions launch of Operation Green with an allocation of Rs 500 crore to promote FPOs, agro logistics, processing facilities and professional management. So the budget has opened various paths for the growth of business and it is now on entrepreneurs to open the door and select their path of success to reap maximum profits leading towards a better tomorrow.

The article is authored by Avinash Mayekar, MD & CEO, Suvin Advisors Pvt. Ltd.

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