Indian budget does not include textile industry support
The Union Budget presented by finance Minister Arun Jaitley on February 29, 2016, did not list the textile industry, which is the second largest employment provider in the country after the agriculture sector. Experts were surprised, because the budget is beneficial for companies of big brands instead of the common entrepreneurs who have been doing business for decades
Ichalkaranji, Bhiwandi and Malegaon are the textile hubs of Maharashtra, where cloth is produced, using cotton imported from Vidarbha and other cotton producers. Kolhapur also hosts India’s two of the 21 textile parks. The industry in Ichalkaranji, also provides directly or indirectly employment to more than 80000 people, and was expecting incentives to powerlooms and grants for modernisation.
Dhanpal Tare, Chairman of Indian Powerloom Federation, said that there is hardly anything for the common textile industry in this budget. He was surprised that the Minister forgot the textile industry, which is the second largest employer in India. The industry was expecting something from the budget as they were aiming for programmes such as “Make In India”. The export is declining for the last 11 months. Under such circumstances, they were seeking incentives from the government to boost export.
Tare said that the textile industry provides more than 50 % employment to women and unskilled workers. In the budget, the government has offered to reduce basic customs duty on specified fibres and yarns. The duty has been reduced from 5 % to 2.5 %, which will benefit readymade garment manufacturers, especially big brands.
Indian technical textile contributes only 1 % to the world industry and the Minister should have focused on it. The Technical Textile industry is dominated by China and Western countries, where Indian technical textile contributes only 1% to the world industry, the minister should have focused on it. Tare said that they have missed the bus again.
Prakash Awade, former Maharashtra Textile Minister, also expressed unhappiness over the budget. They were expecting Jaitely to rescue the industry from recession. Instead, he chose to watch the situation. The powerloom modernisation programme started during the earlier Union government’s regime may receive a setback.
In the meantime, Maharashtra’s textile policy restructuring committee has decided to wait and watch until the discussion over the Budget speech concludes. Ichalkaranji MLA Suresh Halwankar, who is also the Chairperson of the committee, said that they will have to study the Budget speech, and watch the discussion over it, before commenting on anything. He said that once all the details on the budget come out, they will take a call on what is better for Maharashtra.
However, they are sure that the finance minister will consider their request of reducing taxes for the industry as it is one of the largest contributors to India’s exports with approximately 11 % of total exports.
In its pre-budget memorandum, CITI an industry body had pitched for lowering excise duty on manmade fibre and filament from 12 % to 6 % which would have reduced the tax burden on MMF and reduce cost to the weaver. Changes in labour laws and better market access to major markets like the US and EU via trade pacts were the other two demands.
FICCI, another industry body had pointed out that the value chain in textile and apparel sector had differential tax treatment. These different rates created needless distortions. While excise duty on natural fibres like cotton, wool and flax is nil, manmade fibres and yarns attract duty as high as 12.5 %. China, Pakistan, Sri Lanka, Indonesia and Thailand follow fibre neutral policy i.e. the duty on cotton/cotton yarn and MMF/MMF yarn textiles are imposed at the same level. It was therefore suggested by FICCI that excise duty on man-made fibres/yarns should be reduced to 8 %. This measure would have further helped the downstream industry especially weavers.
Ironically, the union budget has proposed changes in sharp contrast to the demand. Readymade garments of high quality will be dearer, manufacturing cost will go up, recycling PET will be unviable, and importing MMF and specific fabric will be cheaper.
However, the budget for 2016-17, proposed to change the excise duty on branded readymade garments and made up articles of textiles with a retail sale price of INR1,000 and above from ‘Nil without input tax credit or 6 %/12.5 % with input tax credit to 2%, without input tax credit, or 12.5% with input tax credit.
Tariff value for excise /CVD purposes on readymade garments and made up articles of textiles is changed from 30 % of retail sale price to 60 % of retail sale price.
Excise duty on PSF / PFY, manufactured from plastic scrap or plastic waste including waste PET bottles, is proposed to change from 2 % without input tax credit or 6 % with input tax credit to 2 % without input tax credit or 12.5 % with input tax credit.
Basic customs duty on specified fibres and yarns was reduced from 5 % to 2.5%. Similarly, basic customs duty on import of specified fabrics [for manufacture of textile garments for export] of value equivalent to 1% of FOB value of exports in the preceding financial year is exempted subject to the specified conditions.
However, with the New Textile Policy on the anvil, the textile industry will have to wait for some more time to hear the ‘Make in India’ mantra of the Modi government.