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Newsline-National | July 2016

Rs 6,000-cr package to spur $11 bn investment

The Government has approved a Rs 6,000 crore special package for textiles and apparel sector to create one crore new jobs in 3 years, attract investments of $11 billion and generate $30 billion in exports.

The special package for textile and apparel sector was approved by the Union Cabinet under the Chairmanship of Prime Minister Narendra Modi. The package is a strategic decision that would strengthen and empower the Indian textile and apparel sector by improving its cost competitiveness in the global market. The measures also assume significance due to its potential for social transformation through women empowerment; since 70 per cent of the workforce in the garment industry are women, majority of the new jobs created are likely to go to women.

M Senthilkumar, Chairman, The Southern India Mills’ Association (SIMA) has welcomed the package and stated that slew of measures announced for the garmenting sector would greatly help the garment exports which attract 16 to 20 per cent duty in all the major international markets.

SIMA Chairman has profusely thanked the Prime Minister and the Union Cabinet, particularly the Minister of State for Textiles, for announcing such an attractive package in a right time when the entire textile industry has been passing through a long drawn recession due to delayed FTAs and market access limitations.

He has stated that the package would also help the entire value chain right from fibre to finished fabric due to increased demand in the long run.

SIMA Chairman has welcomed the relaxation of labour laws which is a long pending demand of the industry. The announcement of bearing 12 per cent of the employer’s contribution of Employee Provident Fund Scheme by the Government for the new employees of the garment sector for the first three years would greatly benefit the sector and the employees under the current scenario. Senthilkumar has hailed the announcement of optional EPF for employees earning less than Rs 15,000 would heave a sigh of relief for the garmenting sector where large number of employees work for short term and prefer to take full wages without deduction.

Senthilkumar has said that increase of overtime cap from the current level of three hours to eight hours in line with ILO norms would benefit the garmenting sector to mitigate the labour shortage and meet the delivery schedule.

The introduction of fixed term employment, a long pending demand of the industry, would facilitate the garmenting sector to manage the production demand during peak season and enable the sector to grab the export orders, Senthilkumar says.

SIMA Chairman has highly appreciated the increase of subsidy under Amended TUF Scheme for the garmenting sector from the current level of 15 to 25 per cent and has stated that such an attractive incentive would not only bring new investments, but also motivate the existing units to go for forward integration and increase exports.

Yet another long pending demand of the industry of refunding the state levies in the duty drawback rates would make Indian garments competitive in the global market by preventing the taxes being exported, says SIMA Chief. He has also welcomed the inclusion of garments produced out of fabrics imported under Advance Authorization Scheme under the drawback rate to claim the rates for domestic duty paid on various inputs. He has also welcomed the reduction of number of working days for workers from 240 to 150 under Section 80JJAA of Income Tax Act. He has stated that garment manufacturing being a seasonal activity and also facing high labour attrition, this reduction would benefit the garment units which have such problems. SIMA Chairman has hoped that the Union Government would announce the comprehensive textile policy within a week.

The Confederation of Indian Textile Industry (CITI) Secretary General Binoy Job said, “We hope once the positive results are out, government will extend it to the entire value chain of textiles as the sector has huge potential for job creation.”

Apparel Export Promotion Council Chairman Ashok G Rajani said the refund of employers contribution of EPF, additional incentives under ATUFS and enhanced duty drawback coverage will help the industry gain cost competitiveness. However, he said, the industry is also looking at R&D support and incentives for innovation which have not come through.

“As the Indian textiles and garment industry is facing tough competition in the global market, the refund of state levies come as a breather and would help it gain competitiveness in global markets where we have to compete with other countries that enjoy duty free regime,” Chairman, Ficci Textiles Committee, Shishir Jaipuria said.

Exporters’ body FIEO President S C Ralhan said the rebate on state taxes through duty drawback route and grant of duty drawback in case of import of fabric under Advance Authorisation would add to cost competitiveness of exports.

The tax incentive relates to enhancing scope of Section 80JJAA of Income Tax Act under which, looking at the seasonal nature of garment industry, the provision of 240 days under the section would be relaxed to 150 days.

Besides, the government will bear the entire employer’s contribution of 12 per cent under the Employers Provident Fund Scheme for new employees of garment industry earning less than Rs 15,000 per month for the first three years. Moreover, EPF will be made optional for employees earning less than Rs 15,000 per month.

“The measures unveiled will give a much-needed impetus to the Indian apparel industry and spur growth, employment and investment,” CII Director General Chandrajit Banerjee said.

B K Goenka, Chairman, Welspun Group and Co-Chairman CII National Committee on Textiles, said the proposed flexible labour reforms will help achieve scale in the apparel sector.

An elated Ashok G Rajani, Chairman, AEPC said, “The apparel industry thanks the Prime Minister and the Textile Minister, Santosh Gangwar for a very comprehensive package that has not only addressed the industry’s needs, but also the employment generation needs of the country, that this industry can address. The cost differential that India suffers vis-à-vis our competing countries has been duly addressed. The refund of employers contribution of EPF, Additional incentives under ATUFS , enhanced duty drawback coverage with drawback for domestic duty paid inputs even when fabrics are imported under Advance Authorization Scheme, etc., are support that will help the industry gain cost competitiveness”.

He further added that, “the labor reforms will not only help the industry, but also the workmen as it encourages new employment, ensures better take home salaries for lower income workers and puts contractual workers at par with permanent workman in terms of working hours, wages, allowed and other statutory dues. The industry is gearing up the $20 billion target set for this year. With a decline in exports for the last five months in a row, major global markets still recording negative growth and the Brexit uncertainty looming large, the package is timely and gives the industry hope for revival.”

Lalit Thukral, Twenty Second Miles expressed gratitude towards the government for coming up with these changes, he said, “I believe this is an excellent policy overhaul by the government. The sector is in dire need of such changes and would appreciate if the government brings about such changes on a regular basis. Trade will grow unabated with such policies.

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