The Indian textiles and clothing industry being the second largest employment provider, next only to the agriculture that provides jobs to over 105 million people especially the rural masses and women folks, the Government has been giving major thrust to enhance the global competitiveness by announcing various policy interventions and bringing historical reforms. During the last two years, though the country and the industry had to face the worst ever crisis due to COVID-19 pandemic lockdown restrictions across the globe, the Government encouraged the industry to convert the challenges into opportunities by extending timely relief measures, export benefits, etc.
The Indian textile industry has been facing two major challenges that stalled the potential growth of the industry i.e., raw material structural issues and huge tariff barriers in the absence of FTAs with major markets like EU, USA, etc. Industry has been appealing the Government to address these two issues on a war footing. Accordingly, the Government has abolished the anti-dumping duty levied on most of the man-made fibres apart from announcing mega textile park, production linked incentive scheme, etc., to encourage scale of operation and also enhance the share in MMF trade exponentially. MMF will be the growth driver for India in the coming years. The Government has also addressed long pending refund of embedded taxes and State levies through RoDTEP Scheme, by covering all the products and also extending RoSCTL with the same rates till March 2024.
At the Press Meet held at SIMA Conference Hall, Coimbatore, the newly elected Chairman of The Southern India Mills’ Association (SIMA), Mr.Ravisam has stated that the Association would closely work with all the Export Promotion Councils especially TEXPROCIL to gain maximum advantage for the textiles and clothing industry through FTAs. He has said that though most of the global brands and buyers prefer Indian textiles and clothing products due to quality and other advantages; India is not able to materialize the export orders mainly due to the price competiveness that is enjoyed by the competing Nations like Bangladesh, Vietnam, Pakistan, Cambodia, Sri Lanka, African countries, etc., that have zero duty access in all the major markets. He has said that though the country entered into SAFTA agreement long back, it is only one sided that enables countries like Bangladesh to dump their garments in India at zero duty while Bangladesh levies high tariff for the yarns consumed by Bangladesh for domestic market. Mr.Ravisam has said that the Government should make efforts to have Yarn and Fabric Forward Rule rather than value addition and Rule of Origin to enable India to gain advantage.
SIMA Chairman has stated that though India has signed several FTAs and RTAs like ASEAN, SAFTA, Asia specific trade agreement and also with the countries like Korea, Japan, Malaysia, Chile, Mercosur, etc., India’s exports have not increased mainly due to tariff and non-tariff barriers, logistics and external trade policies like GST. He said that Vietnam is a huge conversion centre and one of the top exporting Nations of garments with almost US $ 30 billion, as countries like China, Korea, Japan, Taiwan, have made huge investments in Vietnam and taking advantage. He said that Vietnam imported over US $ 15 billion worth fabrics last year of which India’s share is very negligible. He has added that yarn from India at zero duty except for seven HS lines, are still at 5%. He has added that the Indian fabrics are in the sensitive and excluded list with 5% to 6% and 12% duty respectively. Mr.Ravisam has said that FTA negotiations with EU, UK and Canada will ensure a level playing field for Indian home textiles and garments. He said that these products at 9.6% duty in EU and UK and 15 to 17% duty in Canada makes India products uncompetitive when compared to zero duty countries like Bangladesh, Vietnam, Cambodia, Sri Lanka and Pakistan. He said that India should explore an early harvesting programme during pre-negotiations scoping phase of the Enhanced Trade Partnership for zero duty. SIMA Chairman has said that India and UAE are likely to negotiate FTA with the Group Gulf Cooperation Council countries, the second largest destination of India, after USA, with nearly US $ 29 billion. The agreement is likely to be concluded by March 2022 and the CEPA is likely to give more opportunities for India.
While discussing on the issue of the need to address duty inversion in certain segments of the textile value chain, Mr.Ravisam has said that the cotton value chain has become seamless and does not have much problem to be addressed except the issue of the refund of accumulated input tax credit on account of capital goods and certain services especially in the processing sector. He said that the major inversion is happening only in MMF value chain as the fibre attracts 18%, Yarn 12% and fabric & garments 5% GST. While quoting the news appeared that in one of the leading national dailies stating that the GST rates of fabrics and garments below Rs.1000/- will be increased to 12% from 5%, he cautioned that the clothing cost, one of the basic needs of the people, would increase steeply and goes against the fundamental principles of GST. Mr.Ravisam has stated that several segments and products in the textile value chain were under exemption route till 2004 when Cenvat was introduced. He said that the higher rates of Cenvat and VAT resulted in Nation-wide industrial unrest and the Government had to introduce additional Cenvat with zero rate from 2004 to 2017. He has pointed out that the net revenue both for the State Governments and the Central Government have increased by many fold after implementation of GST. He has said that the GST collection of Central Government has crossed Rs.22,000 crores in the recent years while the SGST collection for States like Tamilnadu has increased over Rs.3000 crores that was below Rs.400 crores.
Mr.Ravisam has stated that lower rate of GST has brought high revenue and any attempt to increase the rate of tax will have serious impact on handlooms, powerlooms and other decentralized / MSME sectors that account over 85% of the production in the textile value chain. He has appealed to the Government to bring the entire MMF value chain also under 5% GST. He has opined that it is much easier for the Government to refund the accumulated ITC for the few fibre producers rather than passing on the burden to several thousands of MSME units and the refund burden would be much lower at this stage.
Mr.Ravisam has also appealed to the Government to withdraw the 10% import duty on cotton, as the country has been mostly importing only 11 to 15 lakh bales of cotton as against the total consumption of 330 lakh bales in a year. India mostly imports Extra Long Staple Fibre cotton like American PIMA, Egyptian GIZA for producing value added products and supply to the nominated business of global brand. He has stated that this high value added segment’s business size is around Rs.75,000 crores including Rs.25,000 crores exports and provides jobs to over 12.5 lakh people. He has said that multinational cotton traders took advantage of import duty during 2007 and 2008 and the industry had to face irreparable loss and damage and subsequently the Government had to withdraw the same. Mr.Ravisam has said that even without import duty, the trade speculates the price during the off season have severely affected the MSME units that account over 85% of the production in the cotton textile value chain and the price increase could be seen in the current cotton season itself, the Sankar-6 cotton price has increased from Rs.41,600/- to Rs.54,500/- and DCH price has increase from Rs.53,000 to over Rs.1.00 lakh per candy of 355 kgs that has disrupted the export commitments of fabrics, garments and made ups producers in the country.
Therefore, Mr.Ravisam has urged the Government to exempt ELS cotton from import duty.