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GST reform a major step forward: CITI

Nov 01, 2016
GST reform a major step forward: CITI

The politics of Goods and Services Tax (GST) Bill may take some more time to sort out, but its basic impact on various industries can be analysed beforehand. GST and its impact on the textile sector was the hot topic of discussion at the recently-concluded 58th Annual General Meeting of Confederation of Indian Textile Industry (CITI), held at Hotel ITC Maratha, Mumbai on September 28, 2016. Speaking on GST were: Sachin Menon and Santosh Dalvi from KPMG, and Sanjeev Saraf and Dilip Dixit from BSR & Associates.

In the current scenario, there are usually low or zero rate of taxes on the final products. The current taxes vary from 4-12 per cent on the various categories of textiles. Due to the lower rate, the tax is shifted back to production leading to blocked input taxes. Hence the cost of production is higher. The current taxation is production based which will be transformed to consumption based with the GST introduction.

Cotton scenario

PD Patodia, Chairman, Standing Committee on Cotton on the occasion of CITI’s AGM, was happy with the outcome of the CITI CDRA’s cotton development efforts in lower Rajasthan during the past eight years and in Wardha district of Mafiarashtra during 2015-2016.

The CITI CDRA in association with the agriculture department of Government of Rajasthan, Bayer Crop Science and Rajasthan Textile Mills Association implemented cotton development projects in Banswara, Bhilwara; Rajsamand, Ajmer, Jodhpur, Nagaur and Pali districts. While the cotton collaborative project covered an area of over 3 lakh acres and 76,617 farmers from 1407 villages, the Front Line Demonstration pogramme was taken up in 756 village from these districts.

These welcome changes in lower Rajasthan almost doubled the cotton production from 9 lakh bales in 2007-08 to 17 lakh bales in 2014-15. He added, “I am pleased to point out that lower Rajasthan now accounts for 54 per cent of the area under cotton in the State as against 41 per cent in 2007-08. Its share in production was only 19 per cent of the total state production in 2007-08, now it account for over 62.5 per cent (2015-16).”

He added, “I would further like to inform you that the CITI CDRA is proposing to cover adjoining districts ut Ratlam, Dhar and Jabhua from Madhya Pradesh for increasing the cotton production of ELS cotton like DCH 32. Besides, the CITI CDRA, in association with the mills consuming ELS cottons and ginning and pressing factories, is planning to take up a project to deal with problem of contamination in Indian ELS cottons in a bigger way. In due course, it will chalk out a plan to cover other cottons as well.”

Trends in textile

Naishadh Parikh, Chairman, CITI, says, “No surprise that the global trade growth in textiles has slowed down appreciably but there are parts of the value chain that are showing negative growth rates such as yarns followed by fabrics. Most of the trade growth is only seen in readymade garments and made ups.”

He added, “While India has donewell in made-ups/garments in recent years, it has lagged behind competitors such as Bangladesh & Vietnam which now boast of apparel exports that are comparable (Le. Vietnam) or significantly higher (i.e. Bangladesh). While China’s textile juggernaut is slowing down, nevertheless China remains the world’s giant by far.”

On a more micro level, there is a very clear and steady trend in change in fibre-mix. The world is moving to 35:65 in favour of MMF led by new developments and innovations in MMF and processing of MMF fabrics. Parikh says, “In contrast with the world trends, India has only marginally moved up from 65:35 cotton-MMF to 58:42 cotton-MMF composition of its textile industry. It is an absolute imperative that if Indian textile industry has to grow (both for exports and for domestic market), then fibre neutrality is an absolute must.”

“As far as cotton specifically is concerned, while it is blessed with a free trade regime with few physical or tariff barriers, we have to keep in consideration that cotton (along with rice and sugarcane) is a water intensive crop. Climate change induced changes in weather / water patterns, and government’s more recent interventions in increasing the MSP for other crops such as pulses, we can no longer take for granted that Indian Government will continue to support the acreage currently under cotton cultivation,” says Parikh.

He added, “The textile industry needs to accept the realities and change in dynamics of global textile trade and investment destinations driven by competitiveness and trade preferences. At the same time, it must also acknowledge the increasing domestic market opportunity but with a new vision to create many more Indian clothing and made-ups brands so that the textile and garment manufacturers do not remain merely suppliers to global brands that have entered India (and more will come as the Indian market’s attractiveness increases).”

Madurai-based Thiagarajar Mills (P) Ltd won an award during the CITI AGM meet. M Muthu Palaniappa, Vice President (Technical) of Thiagarajar Mills represented his company to take the award.