The Indian textile industry has sought immediate relief from the government after one-third of their production capacity lays idle in the market. Poor domestic demand, sluggish exports and rising imports from Sri Lanka and Bangladesh have left the clothing industry struggling.
According to Confederation of Indian Textile Industry (CITI), the trade association body, majority of the spinning mills across India had to cut down their production capacity from 50 per cent to 15 per cent because of the underutilised excess stock lying in the godowns.
Sanjay Jain, the chairman of the federation said, “Textile and clothing segments are presently going through a deep crisis due to uncompetitive fibre prices, declining exports, in-competitiveness of our products in international markets, embedded taxes not getting refunded, and lack of working capital, among others.”
The poor consumer sentiment has led the domestic demand to fall by 10-15 per cent and has also had a great impact on garment sales and expectations during the festive season. The exports of cotton yarn also fell drastically in Q1 from 338 million kg a year earlier to 226 million kg this year, marking a huge difference of 33 per cent.
The textile industry which provides employment to at least a 100 million people, directly or indirectly, has now approached the government to help them overcome this situation by asking them to extend tax incentive schemes to the entire industry and transfer subsidies to the accounts of cotton farmers’ through direct benefit transfer (DBT) instead of offering a minimum support price (MSP) for their produce.
The CITI has also made some recommendations to the state government on the same issue, advising them to avoid incentivising new spinning mills for three years so as to prevent the existing units from turning into Non-Performing Assets (NPA).
The Rebate of State and Central Taxes and Levies (RoSCTL) scheme which is currently available only on the export of garments and bed linen, the industry now wants its support to be extended to the export of cotton yarn as well to make the industry internationally viable.RoSCTL is a beneficial tool that can help revive the industry as it allows the reimbursement of export duties and rebate on embedded taxes such as mandi tax, agricultural cess, and power and fuel surcharge that was incurred in the production process. The refund rate in RoSCTL varies from 3 to 5 per cent depending on the kind of product.
KV Srinivasan, the chairman of Cotton Textiles Export Promotion Council (Texprocil), said, “The RoSCTL scheme is compliant with the World Trade Organization (WTO) norms and can be immediately implemented. It will give us an advantage while exporting cotton yarn over Pakistan and Vietnam who get duty free access to China and European markets.”
According to the industry players, the country’s bilateral trade agreement for fabric and yarn with China and for apparels with other countries like Canada, EU and Australia is definitely going to push the sales figures up. The export duty on cotton and yarn to China and Europe stands at 4 per cent at present.
Owing to all these reasons, India lost its status of being the second-largest exporter in the textile and clothing industry after China and fell down to the fifth position in 2018 with Germany, Bangladesh and Vietnam leading the race.