export performance, a serious concern for mmf segment

The Synthetic & Rayon Textiles Export Promotion Council (SRTEPC) is one of the oldest Export Promotion Councils in India. The council has played a transforming role over the years, inculcating export culture and promoting exports of Indian man-made fibre (MMF) and textiles. Exports of these items, which were negligible in the 1960s, have grown substantially to touch $6.16 billion during 2013-14. India exports to nearly 140 countries at present.

Ronak Rughani, Chairman of SRTEPC, speaks on the expectations from 2020, and steps taken by the government to boost exports.

Excerpts…

How was 2019 for the Indian exporters of MMF and textiles? Exports of Indian MMF textiles during 2018-19 were $6,138.57 million against $6,024.08 million during the same period of previous year showing a growth of nearly 2 per cent.

However, during the last three quarters of 2019-20, export performance has been discouraging and is a serious concern for the Indian MMF textile segment. As per the latest available statistics exports during April-October 2019-20 in value terms were $3,427.63 million against $3611.46 million, witnessing a decline of 5.09 per cent as compared to the corresponding period of the previous year as per the data released by the DGCI&S.

During the observed period, exports of MMF yarns have witnessed a decline of 15.8 per cent, exports of MMF have witnessed a decline of 8.37 per cent and MMF made-ups have witnessed a decline of 5.21 per cent. Only MMF Fabrics exports have witnessed 7.89 per cent growth during April-October 2019-20 as compared to the same period of the previous year.

What are the challenges before Indian exporters today?

Challenges being faced by Indian exporters are the following:

• Job work is not considered as manufacturing in the GST regime: In the textile sector, value addition works such weaving, knitting, processing, embroidery, etc. are done mostly through job work which accounts for a significant part of the total manufacturing costs. Before the GST was implemented job work was considered as manufacturing. However, in the GST regime the job work has been considered as Input Services NOT considered as manufacturing and accordingly GST paid on these job work/services like weaving, knitting, processing, embroidery and other value additions are not allowed for ITC/ refund. This has resulted in to huge ITC accumulation and blockage of substantial working capital that in turn adversely impacting on exports. Therefore, it is suggested to consider job work/ services like weaving, knitting, processing, embroidery and other value additions as manufacturing and allow for ITC/ refund of the duties paid on these activities under the GST regime.
• Textile merchant exporters are not considered as manufacturer exporter: In textiles segment Merchant exporter is the Textile Merchant Converter Exporter who procures raw material viz., yarn, sends it to Weaver for weaving preparatory (twisting, sizing, warping, etc.) and weaving greige fabric gets it dyed/processed/printed /finished pack it by paying conversion cost/job charges and export the finished fabrics. He is also contributing to employment generation and the demand-supply chain of textiles. Therefore, textile merchant exporters are at par with the manufacturing exporters.
• Raw-materials are not availability at international price: In Indian the price of textile raw material such as fibre is 10-15 per cent higher than international price. This higher raw material price in India is one of the major reasons for our exports not being able to be competitive. Government should put in place a proper mechanism to ensure availability of raw materials domestically at international price for the entire MMF textile value chain and regulate volatility in raw material prices.
• There are GST anomalies: In the GST regime the entire MMF textile value chain falls under Inverted Duty Structure wherein output carries 5 per cent GST rate whereas Inputs are taxed at 12 per cent and 18 per cent respectively. This creates a situation of excess ITC being accumulated, referred to as the Inverted Duty Structure. This has resulted in huge amount of Input Tax Credit (ITC) accumulation and blockage of working capital in the MMF textile segment. Therefore, it is urgent to rationalise the existing inverted duty structure in GST with regard to the MMF textiles segment.
• Higher interest rate: Availability of affordable working capital is vital for sustenance and growth of a company. Interest rates in India are amongst the highest in Asia and it is one of the reasons for higher cost of textile products in India. Higher interest rate is also one of the reasons for becoming NPAs in the country and adversely impacting both production and exports. The Government needs to put in place a mechanism to ensure availability of fund/capital at ease and at lower rate of interests. Since affordable working capital is a big concern for the Indian textile exporters both in the pre shipment and post shipment stages.
• No Schemes for production and development of MMF raw-materials, MMF and filament segment in line with cotton, jute, silk, etc.: Currently, there are separate and specific government schemes for development of various textile fibres viz., cotton, wool, silk, jute, etc. Whereas, for production and development of MMF raw materials viz., PTA, MEG, Caprolactam, etc., MMF and filament segment domestically there is no such separate and specific scheme of Government, as the present TUFS implemented by the Ministry of Textiles (MoT) does not cover MMF raw materials, MMF and Filament segment saying that these items don’t fall under the jurisdiction of MoT. Therefore, it is suggested that Government needs to introduce schemes/missions approach specially for production and development of MMF raw materials viz., PTA, MEG, Caprolactam, etc., MMF and filament segment domestically in line with Cotton, Jute, Silk, etc.
• Lack of investment in the weaving, knitting, processing and technical textiles segment: Declare weaving, knitting, processing and technical textiles and also integrated mega scale projects are the key growth areas. Encourage consolidation of capacities, acquisition and merger to achieve economies of scale. Also encourage and facilitate technology upgradation and scale of operation on a fast track.
• Lack of adequate supporting schemes: In keeping with the goal of making India’s development inclusive and participative, the Government’s central focus has been on increasing textile manufacturing by building the best-in-class manufacturing infrastructure, upgradation of technology, fostering innovation, enhancing skills and traditional strengths in the textile sector Schemes meant for the development of Infrastructure, production, skills and employment generation such as TUFS, SITP, RoSL/RoSTL, SCBTS, etc. need to be strengthened.
• Lack of global brands: The Indian MMF textile industry does not have brands. Therefore, current global visibility of the MMF textile industry is inadequate. The USA and EU have been controlling the entire gamut of apparel/textile markets globally without having their domestic manufacturing base in the entire textile value chain. Only because of the major apparel brands such as INDITEX (ZARA), Hennes & Mauritz, Gap, Marks & Spencer, etc. from EU and USA these countries have been dictating the global Fashion world. In line with the successful apparel brands such as INDITEX (ZARA), Hennes & Mauritz, Gap, Marks & Spencer, etc. from EU and USA, India also needs to have textile brands that will have global presence.
• WTO compatible schemes: Government needs to support the textile segment by continuing the existing schemes until the new WTO compliant schemes are made functional. Further, besides the RoDTEP scheme, Central government as well as state governments should work out policy initiatives and schemes for increasing efficiency in the textile segment and help produce the textile products at a very reasonable rate by ways of giving production related subsidies/ benefits for the entire textile industry value chain such as fibres, filaments, spun yarns, fabrics, made-ups, etc.
• xi.Lack of established mega annual event: Lack of proper exposure and aggressive marketing is one of the weakest linkages for exports of Indian textile products. Therefore, there is an urgent need to have a mega Exhibition/ Fair like “Textiles India 2017” wherein the entire textile value chain of India can be displayed and our strength in the entire gamut of textile and apparel value chain can be showcased, from farm to fibre to fabric to fashion and help India establish as a global textile sourcing hub and investment destination. China has established textile fairs like Canton Fair, Intertextile Shanghai, etc.
• xii.Effective FTAs: Currently existing FTAs that India has signed with ASEAN, Japan, Korea, Malaysia, etc. observed to be less impactful in boosting our exports. Efftctive FTAs with major textile consuming markets will give us substantial price advantage for our textile products. Therefore, it is suggested that the FTAs with EU, GCC, Turkey, USA, etc. may be prioritised. Review of the India – ASEAN needs to be done on priority.
• xiii.Anti dumping cases: Some of the major MMF textile markets such as Turkey, EU, Peru, USA, etc. have imposed Anti-dumping duties (ADD) on exports of MMF textiles from India. Some of these ADD cases viz., Turkey, EU and Peru have been continuing for almost a decade. Peru has been continuing imposition of heavy Anti-dumping duties on Polyester Viscose Fabrics originated from India, without having convincing reasons for the same. This Council has already presented the Peru ADD case with the Commerce and Industry Minister also. None resolving of the ADD by these markets have impacted exports of MMF textiles from India. Government needs to take urgent steps to resolve the above mentioned Anti-dumping cases so that the exports from India also could get a level playing field in these markets.
• xiv.No adequate focus on R&D: R&D is part and parcel for sustenance and growth of textile industry today. Growing impact of textiles manufacturing on environment can be reduced through R&D by ways of upgrading R&D to achieve Zero Defect – Zero Effect. However, the Indian MMF textiles industry still continues of conventional technology. Focus on R&D and state-of-art technology is the need of the hour for MMF textile segment.

What are your expectations from 2020? What steps could you like the government to take to boost exports (especially since the Budget 2020-21 will be presented soon)?

During 2020 we are optimistic to have a better export scenario for the Indian MMF textiles and want the Government to take the following Strategic steps:

• Fibre neutrality: Domestically for this capital intensive and decentralised MMF textile sector being predominance of MSMEs, it is suggested that the Government needs to bring in fibre neutrality and policy parity between fibres.
• iRaw-material availability at international price: Government should put in place a proper mechanism to ensure availability of raw materials domestically at international price and regulate volatility in raw material prices.
• Job work to be considered as manufacturing: Government should consider job work, especially in the textile sector as Input as it was before the GST was implemented and accordingly allow ITC/ refund on these job works like weaving, knitting, processing, embroidery and other value additions.
• Textile merchant exporters to be redefined as manufacturer/manufacturing exporter: Since the textile merchant exporters are doing the similar activities that of manufacturing exporter, the textile merchant exporter needs to be considered as Manufacturing exporter and be treated both at par. Currently, more than 60 per cent of member-exporters of SRTEPC are from the Merchant exporter category. Therefore, it is suggested that textile merchant converter exporters should be treated at par with manufacturer exporter or the role of textile merchant converter exporter may be defined separately so that all benefits which are available to the manufacturer exporter can also be extended to the textile merchant exporters and as a result there will be substantial positive impact on exports.
• Branding: In line with the successful apparel brands such as INDITEX (ZARA), Hennes & Mauritz, Gap, Marks & Spencer, etc. from EU and USA, India also needs to have textile brands that will have global presence. In this regard, Government should provide assistance and handholding support.
• Government schemes: Continue the existing Chapter – three benefits/ schemes such as MEIS, RoSL/RoSCTL, Interest Equalisation, etc. because all these Schemes have been devised to address various challenges that the textile industry has been facing. And include entire MMF textile value chain for the benefits under the Schemes such as MEIS, RoSL/RoSCTL, Interest Equalisation, etc. New Scheme RoDTEP also needs to cover entire MMF textile value chain such as fibre, yarn, fabrics, made-ups, etc.
• Devise WTO compatible schemes: The Government needs to support the textile segment by continuing the existing schemes until the new WTO compliant Schemes are made functional. Further, all the products in the textile industry value chain such as fibres, filaments, spun yarns, fabrics, made-ups, etc. need to be covered under the RoDTEP scheme.
• Rationalise GST: Rationalise the existing inverted duty structure in GST with regard to the MMF textiles segment.
• Fund/ capital at lower interest rate: Government needs to put in place a mechanism to ensure availability of fund/ capital at ease and at lower rate of interests. Since affordable working capital is a big concern for the Indian textile exporters both in the pre shipment and post shipment stages.
• Organisation of mega annual event: A mega Exhibition/ Fair of the scale of “Textiles India 2017” needs to be organised in India regularly on an annual basis under the aegis of the Government wherein all the Textile Export Promotion Councils (EPCs) should be provided handholding support to bring on board maximum number of their member – exporters and invite leading international buyers.
• Effective FTAs: FTAs with major textile consuming markets will give us substantial price advantage. Therefore, it is suggested that the FTAs with EU, GCC, Turkey, USA, etc. may be prioritised. Review of the India – ASEAN needs to be done on priority.
• Resolve anti dumping cases: The Government needs to intervene in resolving some of the long ongoing ADD cases such as ADD imposed by Peru on Poly Viscose fabrics, ADD imposed by Turkey on PSF, PTY, FDY, etc. SRTEPC has already presented both the cases of Peru ADD and Turkey ADD to the Hon’ble Commerce and Industry Minister. None resolving of the ADD by these markets have impacted exports of MMF textiles from India. Government needs to intervene in both the cases and take urgent steps to resolve so that the exports from India also could get a level playing field in these markets.

Which are new areas of opportunities (in terms of product and region/countries) that Indian exporters of MMF and textiles need to explore?

The present textile scenario is likely to change substantially in the days to come. Currently, sustainability is a prime issue concerning the textile manufacturers. In many parts of the world awareness regarding carbon footprint, economizing use of natural resources, recycling, etc. has been growing which has also been supported by NGOs and world’s leading apparel brands viz., Christian Dior, Nike, ZARA, Hennes & Mauritz, Gap, etc. accordingly, these global brands have been directing the textile producers as to what need to be the lines of production, fibre/ filament type and quality, etc.

Some of the new areas of opportunities are technical textiles including recycled & speciality fibres, value added yarns and fabrics, active/sportswear, leisurewear, home textiles, etc. Potential markets are USA, Canada, EU, Australia, etc. There are growing opportunities in the LAC countries and Africa.

What are the plans (priorities) of SRTEPC – one of the oldest export promotion councils in India – for 2020?

Being an Export Promotion Council, we have identified 11 potential MMF consuming markets such as Brazil, Colombia, Turkey, Russia, Sri Lanka, Germany, etc. for organising export promotional programmes for the FY 2020-21.

We are trying to extend our export promotional services to all the MMF textile clusters of the country and bring them on board under SRTEPC maximum of the companies being engaged in MMF textiles manufacturing and export. We are making constant effort to educate the MSMEs engaged in MMF textile production as to how they can export their products, be quality compliant, aware about the market opportunities, etc. The council is guiding these MSMEs right from obtaining IEC license, finding international buyer, filling GST returns, receive export realisation, etc. and providing them all round support for export. During 2020-21 it is envisioned to achieve an export target of around $6.8 billion – a growth of nearly10 per cent from the present export of $6.2 billion.