Budget 2020 FOCUS ON GROWTH!
Textile industry has something to cherish in the Budget with the abolition of ADD on PTA imports, prioritisation of technical textiles sector, review of rules of origin in FTAs to curb imports from Bangladesh, and RoDTEP, NIRVIK and other measures taken.
Textile industry has something to cherish in the Budget with the abolition of ADD on PTA imports, prioritisation of technical textiles sector, review of rules of origin in FTAs to curb imports from Bangladesh, and RoDTEP, NIRVIK and other measures taken. Finance Minister Nirmala Sitharaman in Budget 2020 proposed National Technical Textile Mission with an outlay of Rs 1,480 crore over four years to cut down imports. In the Budget, as much as Rs 27,300 crore have been provided for the development and promotion of industry and commerce. This is expected to give thrust to production of a wide variety of textiles used in technical textile sectors such as healthcare, personal protection, infrastructure, automobiles, defence, and agriculture. The National Technical Textiles Mission aims at positioning India as a global leader in technical textiles.
Removal of ADD on PTA: a game changer
In the backdrop of economic slowdown and recession, the Union Budget for the year 2020-21 was widely expected by the industry circles as how the proposals would address the problems of the industry and the impact that would facilitate the industry to mitigate the challenges and enhance the global competitiveness of the textile industry. The textile industry has been demanding for the abolition of anti-dumping duty (ADD) levied on purified terephthalic acid (PTA), the basic raw material used for the manufacture of polyester staple fibre and filaments, to remain globally competitive. The Ministry of Textiles has envisaged increasing the textile business size from the current level of around $169 billion to $350 billion by 2025 and to $650 billion by 2030 in its draft Textile Policy being formulated by the Government. This target could be achieved only by making the polyester fibre and filaments available at international price as the country has limitations to increase the fibre base within the country.
PTA is a raw material for production of polyester fibre. This was one of the long-pending demands of the industry. Abolition of anti-dumping duty will bring polyester fibre price in India on a par with international price. Polyester will be the future growth driver for the Indian textile industry. However, it is to be seen how the issue of non-availability of high performance fibres, namely, Aramid, Carbon, Glass, Nylon 66, Antistatic, FR Viscose, etc. will be made available in India for which technical textile industry is totally dependent on imports, as they are not manufactures in India.
â€œTextile industry has high hopes from Union Budget 2020. Growth in textiles is through man-made fibres. The Government has to remove hurdles for accelerating growth of man-made fibre (MMF). Inverted duty structure in goods and service tax (GST) needs to be corrected. ADD on raw materials â€“ PTA has to be abolished to ensure adequate raw material availability at international prices. Prevention of duty-free access of garments from Bangladesh and Sri Lanka and import duty on yarn to be increased to make domestic production competitive,â€ said Madhu Sudhan Bhageria, Chairman and Managing Director of Filatex India, in his Budget proposal for 2020-21.
GV Aras, Director, A.T.E. Enterprises, said, â€œThere were high expectations on the budget in view of a dire need of fiscal reforms to save the sliding economy and boost consumption. In that backdrop not much was done by Finance Minister. Even on personal income tax front much more could have been done thereby bringing in more savings at the hands of consumers and increase consumption. What has been done has been more of eyewash.â€
He added, â€œAbolition of ADD on PTA will be a major game-changer for the synthetic industry, which badly needed a boost. This will increase the utilisation of polyester capacity in the country and increase the share of polyester in fibre consumption. Ultimately the consumer will get benefited in terms of availability of cheaper fabrics and garments and will also help in increasing exports of the textile goods.â€
Ashwin Chandran, Chairman, The Southern India Millsâ€™ Association (SIMA), Coimbatore, thanked the Prime Minister for favourably considering the long pending demand of the industry and abolishing the ADD being levied on PTA imported from different countries including China, Indonesia, Taiwan, Iran, Malaysia. He has stated that the PTA attracts ADD from $27 to $160 per metric tonne depending upon the country of origin and the country often faces shortage of PTA that curtail the capacity utilisation of the polyester segment industry. He has said that this announcement has come as a boost for the PTA users and the entire MMF textiles and clothing segment. He has stated that this would greatly help the country to enhance the global competitiveness, boost exports and also enable the domestic manufacturers to compete with the cheaper imports. Ashwin also welcomed the proposal of curbing cheaper imports by imposing rule of origin and other safeguard measures on the free trade agreement (FTA) countries.
The withdrawal of duties on PTA â€œwill potentially open up the MMF value chain and give a fillip to the entire MMF industry and enhance its global competitiveness,â€ claims Rakesh Biyani, President of Clothing Manufacturers Association of India (CMAI).
â€œWith imports being drastically cut down, there is less opportunity for new entrants and strengthens the position of local players who can fill those niches,â€ avered Rajendra Agarwal, Managing Director, Donear Industries, one of the leading manufacturers of fabrics and garments. â€œTherefore, there are good tidings expected for the textile industry from consumption, an employment generation and boosting demand standpoint.â€
â€œThis gesture is of help to the synthetic fibres industry as India imports it from Thailand and South Korea in addition to having domestic source,â€ stated Krishnasamy Pothiraj, a consultant with Coimbatore-based Shubhalakshmi Polyesters. â€œAs approximately 0.85 kg of PTA is required for 1 kg of polyester fibre manufacturing, availability and competitive price will help the textile industry,â€ added Pothiraj. His company consumes daily about 700 tonnes of PTA for the manufacture of fibres and filaments.
However not all are happy with the Budget proposals as RD Udeshi, President Polyester Chain, Reliance Industries, opines â€œDisappointing Budget, as very little has been done for textile industry. More concrete steps were required for growth of the industry. Vision of $400 billion will remain only on paper,â€ he summed up.
All industry leaders across board have applauded the removal of anti dumping duty on PTA. â€œThis will give a major boost to Indian textile industry and will go a long way in helping downstream industry staying competitive,â€ says T Rajkumar, Chairman, CITI.
Elaborating further T Rajkumar explains, â€œThe mini mission on technical textiles is welcome. Technical textiles has to be encouraged as a lot of fabrics we use in the sector are being imported, the move will help in starting production of specialised input in our country, a lot of investment will come which will also boost employment in the sector.â€
Elaborating on the same, Rahul Mehta, Chief Mentor, CMAI says, â€œThe most important step in this Budget is the removal of the anti-dumping duty on PTA, which was a long standing demand of the textile manufacturing value chain, as PTA is a crucial input for polyester production. This will potentially open up the MMF value chain, and give a fillip to the entire MMF industry and enhance its global competitiveness. Technical textiles, home furnishing, sportswear, saris, dress materials, etc. will all benefit greatly from this move. It has the potential of being an important game changer for the MMF segment.â€
National Technical Textiles Mission: Boost investments, reduce imports
The Indian Technical Textiles Association (ITTA) congratulated the Union Finance Minister and the Union Textile Minister, Smriti Irani and the Government for their proactive steps in making India as a power house of technical textiles. The mission on technical textiles to the tune of Rs 1,480 crore over the next four years should give fillip to most crucial and interesting segment of Indian textile industry.
India imports significant quantity of technical textiles worth approximately Rs 14,000 crore every year. To reverse this trend and to position India as a global leader, a National Technical Textiles Mission is proposed. According to Dr KS Sundararaman, Chairman of ITTA, the size of the technical textile industry in the country is approximately Rs 1.16 lakh crore. A few years ago, the sector received focus to set up eight centres of excellence (COE) across the country. With the need to create a domestic base for raw material production, push for manufacture of high end technical textile products, boost investments, and increase per capita consumption, there is a need for a Mission. â€œWe need to see how this Mission will be implemented. There should be an empowered nodal office that will coordinate all the efforts and make the Mission beneficial to the industry,â€ he said.
GV Aras of A.T.E. Enterprises also felt that the provision of Rs 1,480 crore for the technical textile sector is a welcome move. â€œIndia imports around $16 billion of technical textiles and the investment in the sector will certainly make the country self-sufficient at least to some extent,â€ said Aras.
â€œTextile industryâ€™s hopes were raised after a delegation of industry leaders met Prime Minister before the budget. Hence some major sops were expected in this budget for the textile sector, especially in view of industryâ€™s potential in terms of employment and exports. In that backdrop no major announcement was done which could have really helped the industry become competitive and increase global share,â€ added Aras.
SIMA Chairman has welcomed the announcement of National Technical Textile Mission by allocating Rs 1,480 crore for the next four years. He has said that as the country has been importing technical textiles to the tune of $16 billion per year, this Mission would help the industry to strengthen the technical textile segment taking advantage of benefits already extended under different State textile policies and also the Technology Upgradation Fund (TUF) scheme. He has also appreciated the enhanced allocation of Rs 761.90 crore for A-TUF scheme as against Rs 700 crore allotted during the previous year.
Agarwal of Donear Industries had this to say: â€œOne of the main reasons for the slump in demand for the textile industry has been the rapidly falling consumption pattern of the middle class and the rural belts. The budget has certainly opened up avenues to boost purchasing power. By elevating the prevailing socio-economic condition, it will increase the disposable income of the middle class. Also, it is notable that the textile industry has been one of the leading employment generators in the nation. With easing up business operations and aiding technological developments, there are definitely opening up other avenues for indigenous manufacturers. Simpler procedures will definitely enable textile companies to invest in product extensions. Additionally, the National Technical Textile Mission aims to bolster indigenous production capabilities and at the same time promote eco-sustainable solutions for waste management.â€
â€œThe budget focuses on five priority aspects: health care, respecting wealth creators, agriculture growth, happy living and national defence. The budget presented 16 points to enhance agriculture aimed at doubling farmersâ€™ income by 2022. Textiles industry has something to cherish in the budget with the prioritisation of technical textiles (advanced textiles) sector. A four-year national technical textiles mission is proposed with an outlay of Rs 1,480 crore. As this sector is currently import-intensive, this initiative will boost its growth and domestic development,â€ Dr Seshadri Ramkumar, Professor, Texas Tech University, USA.
Texprocil Chairman KV Srinivasan said, â€œthe proposed National Technical Textiles Mission will give the much needed encouragement to this sector and provide breakthrough in product development.â€
Review of rules of origin in FTAs to curb imports from Bangladesh
All industry leaders welcomed the intent to review the rules of origin in FTAs. It was being observed that imports under FTAs are on the rise. Undue claims of FTA benefits have posed a threat to domestic industry. Such imports require stringent checks. As per the Budget announcement, suitable provisions are being incorporated in the Customs Act and in coming monthâ€™s review of Rules of Origin requirements, particularly for certain sensitive items shall be done, to ensure that FTAs are aligned to the conscious direction of our policy.
A lot of Chinese fabrics and raw materials converted into garments were entering into India through these FTAs. â€œThe move will help reduce imports from Bangladesh etc, which plaguing textile industry. However, a complimentary step in this direction would be expediting FTAs with EU, Australia, Canada and initiating FTA with UK,â€ A Sakthivel, Chairman, Apparel Export Promotion Council (AEPC) says.
â€œThe budget proposal to launch a scheme for remission of duties and taxes on exported goods to refund the duties and taxes levied at the Central, state and local levels, like electricity duties and VAT on fuel used for transportation that are currently not getting exempted or refunded,â€ Texprocil Chairman said.
Industry hails RoDTEP, NIRVIK and other measures taken
For exporters, Sitharaman announced schemes such as Export Credit Insurance Scheme, NIRVIK, which will increase insurance cover for small exporters, and RoDTEP (Remission of Duties or Taxes on Export Product) which will digitally refund local taxes to exporters and will replace the current Merchandise Exports from India Scheme (MEIS).
As per A Sakthivel, â€œThe AEPC is studying the proposed scheme for RoDTEP where export to be digitally refunded duties and taxes levied at the Central, State and local levels, which are otherwise not exempted or refunded. This is an important area which has seen significant shrinkage in policy support in last few months. The new NIRVIK scheme for higher export credit disbursements with greater coverage, reduced premium and simplified procedures for claiming settlements is a welcome step given the increased uncertainties in the global market. We look forward to further details of the scheme.â€
Ashwin of SIMA has hailed the announcement of the schemes for remission of duties and taxes levied on export products and NIRVIK for extending competitive credit facilities and higher insurance coverage with lesser premium and also simplified procedure for claim settlements. He has also welcomed the announcement of addressing inverted duty structure in the GST as textile industry has been suffering with huge accumulation of inverted duty of capital goods and certain services. The various announcements made including the abolition of dividend distribution tax paid by the companies, significant reduction in the personal income tax rate, Vivad Se Vishwas scheme enabling dispute settlement without any interest and penalty, simplification of appeal provisions, GST returns, income tax returns, etc., are also the welcoming features of the budget, says Ashwin.
AEPC also congratulated the finance minister on effectively addressing some key issues of the sector especially in the areas of Ease of Doing Business, National Logistics policy for making MSMEs competitive, simplified return with features like SMS based filing for nil return and improved input tax credit flow, enhancing digital connectivity, support for working capital, financing for MSMEs, five year exemption from audit for MSMEs and easing of tax filing for startups are some import steps towards easing the day to day functioning of MSMEs as also providing a conducive ground for investors.
On similar lines Chandran hailed the announcement of the Schemes for Remission of Duties & Taxes levied on export products and NIRVIK for extending competitive credit facilities and higher insurance coverage with lesser premium and also simplified procedure for claim settlements. â€œHappy to note that FM announced again that Refund of Taxes scheme (RODTEP) will be soon implemented for exporters. As exporters of cotton textiles products are suffering due to a sharp decline in exports of yarn, and retrospective removal of MEIS, it is important to get this scheme implemented for exports all textile products at the earliest,â€ says Lahoti.
SIMA also welcomed the announcement of addressing inverted duty structure in GST as textile industry has been suffering with huge accumulation of inverted duty of capital goods and certain services.
Prem Mallik, past President, CITI, states, â€œThe announcement on refund of taxes including electric duty, mission on technical textiles and intent to incorporate rules of origin in FTAs are welcome steps. I request the government to implement these positive steps, immediately.â€
Ramesh Kaushik, Vice President â€“ Brand Experience, Blackberrys, a leading menswear brand in India, said, â€œThe government remains committed to accelerate consumption in budget 2020. Government measures of reducing corporate tax and initiatives to boost MSME sector will definitely help accelerate industrial and corporate growth in the country. Measures like simplifying GST and income tax relief are sure to give requisite push to consumer consumption and demand thereby accelerating growth across industries. Additionally allocation of funds for infrastructural development is a welcome move clearing path for expansion. We expect more measures/announcements specific to the retail industry from the government in the coming future that will give the right impetus to the industry.â€
Shashi Kiran Shetty, Chairman, Allcargo Logistics, â€œThe proposed roll-out of the National Logistics Policy was one of the hallmarks of the budget. A single window e-logistics market will lead to the integrated development of Indian logistics and help reduce logistics cost. The NLP will also boost value chain efficiencies and generate employment across the supply chain spectrum. The Krishi Udan scheme is a key initiative by the government to help farmers boost their income by expanding markets for their products on national and international routes. The setting up of a Kisan Rail via the PPP mode will help build a robust cold supply chain infrastructure, increase the shelf-life of perishable goods and reduce food loss in the global cold chain. The government will need to continue with its policy of fiscal consolidation, spur job creation and revitalise the credit cycle to propel the economy on the recovery path.â€