measures announced in the budget provide ample incentive
to the sector to compete with China and the 'little' Asian
dragons head-on in the quota-free regime, writes Shubha
have traditionally been meant to be broken, at least when
politicians make them. But in this budget finance minister
P Chidambaram scripted a new act: he kept the promise
to nurture the textile sector, made during the previous
budget. The new measures indicate his intentions to enable
the sector to compete with the dragons of the trade head-on
in the quota-free regime.
gross budgetary allocation is up 16.9 per cent, an investment
of Rs30,000 crore is proposed as against the Rs20,000
crore last fiscal and Rs437 crore has been added to the
Rs25,000-crore Technology Upgradation Fund (TUF). Besides,
these are a basket of duty reductions.
to domain-b, Harminder Sahni, associate
director, KSA Technopak, said, "Capital subsidy is
an excellent step. Other steps outside the budget, like
SEZs and changes in labour laws, in tandem, will benefit
the sector." Looks like all the long-standing grudges
of the industry have been taken care off in one sweep
- except for one: a formal announcement of labour reforms.
the wake of the quota-free regime, seven key concerns
had been voiced by the sector:
Man-made fibres not being treated on par with cotton
reserved for small scale industries
Upgradation of skills and
these, Chidambaram took care of six in his budget speech.
The seventh and most important, labour reforms, went untouched.
days before the annual budget, the government had nevertheless
announced its intentions of ringing in labour reforms
for the export-oriented sector, Left's grudges notwithstanding.
It proposes to allow industry the flexibility to adjust
its workforce according to export order requirement, to
allow 60 hours of work per week instead of the current
48 hours and to withdraw the ban on women working night
shifts. After the budget, Chidambaram said in a televised
interview that labour reforms being a policy decision
were kept out of the budget platform.
to Chidambaram's super six for the textile sector, the
Rs437 crore allocation to the Rs25,000-crore technology
upgradation fund is a major boost. In the post-quota regime,
competition from China, Hong Kong, and other low-cost
countries with huge capacities, forces Indian manufacturers
to compete on productivity, quality and cost. This requires
not just skill but scale and technology as well. The government's
TUF extension will benefit spinning companies and enable
manufacturers to modernise and upgrade their technology
to compete globally.
the TUF committee had recommended hiking the existing
five per cent interest reimbursement to eight per cent
under the scheme. Instead, the government has announced
a 10 per cent capital subsidy for the processing industry.
A welcome step, it will boost investment in textile processing
and benefit the processing industry as a whole.
survive the competitive onslaught, the industry has to
transform its unorganised, small-scale character to become
large, organised and capable of high-cost investments
in modern, high speed machines. Investment of Rs30,000
crore as against Rs20,000 in 2004-05 will go a long way
in moving towards that goal.
customs duty reduction for textile machinery from 20 per
cent to 10 per cent and a 15 per cent cut in import duty
on textile products translates to lot of relief and boost.
The manufacturing houses, especially the small and medium
enterprises can now look ahead to import second hand imported
machinery from various US and European countries. Big
manufacturers can look ahead to capacity expansion and
technology upgradation at much lower costs.
long-standing duty discrimination between man-made fibres
and cotton fibres has also narrowed with this budget.
Custom duty on polyester and nylon chips, textile fibres,
yarns and intermediaries, fabrics and garments is reduced
from 20 per cent to 15 per cent. This duty cut will lead
to increase in synthetic fabric imports. Polyester filament
yarn (PFY), which had turned uncompetitive vis-à-vis
cotton yarn, should see a revival of demand with the reduction
of excise duty on polyester filament yarn from 24 per
cent to 16 per cent.
8 per cent slash in excise duty is expected to bring prices
of polyester fabrics down by around 4 per cent and stimulate
both domestic consumption and also improve its export
share of which over 60 per cent currently comprises cotton
textiles. There has been a roll back in prices already.
Indo Rama Synthetics brought has down the price of polyester
filament yarn by about 8 per cent.
positive announcement has been the de-reservation of 30
textile product items including hosiery which is again
expected to stimulate investment. All this along with
the insurance schemes for weavers and the skills development
initiative promise to help the small and medium enterprises.
Chidambaram's proposal to provide Rs14 billion towards
four-laning 4000 km of highways confers indirect benefits
to the well-being of the sector in the post quota regime.
Some investments to decongest and modernise the ports
would have been an additional help.
this, 'all happy' scenario, one cluster, which is not
so happy, is the readymade garment (RMG) sector which
at best is lukewarm to the package. This is because the
concessions announced come on textiles manufacturing and
textiles manufacturing machines and not garments, and
hence, does not meet the requirement ofthe RMG sector.
Speaking to domain-b, Rahul Mehta, managing
director of exporting firm Creative Garments said, "As
far as the textile industry goes the 10 per cent capital
subsidy, reduction of excise on PFY and concession on
textiles manufacturing machines is beneficial, but there
is nothing in it for the garment sector."
garment exporters' fraternity suffers the most because
of inflexible labour laws. A step forward towards labour
reforms can make Chidambaram's nurturing circle complete.
It's time for textile minister Shankersinh Vaghela to
work towards keeping a promise.