Arvind Mills Ltd: Mr. Naishadh Parikh

It is unfortunate that the Indian textile industry moved in to a crisis since the later part of 2007 when the Indian Rupee gained against foreign currencies and appreciated by almost 25%. Industry had received a good momentum after dismantling of quotas, lower interest rate regime coupled with interest subsidy through TUFS and investments exceeded Rs.125,000 Crore. Textile Industry is a capital and power intensive industry providing perhaps the largest employment opportunity in the industrial sector and exporting almost 50% of its output amounting to US $22 billion, thus relying both on global market and potential domestic market. Agenda for the new Textile Minister as well as the forthcoming budget with respect to textile sector is clear with unanimity amongst all sectors of the industry.

With regards to fibre policy, ad hoc decisions on issues like MSP, export incentives and taxation have been affecting our fibre segment significantly. An integrated and comprehensive fibre policy with a long term vision is necessary to avoid this. The objective of the fibre policy should be to ensure stability in supplies, equitable pricing and proper balance between the interests of producers and consumers of fibres. This will provide sustainable growth for both. High MSPs (after unprecedented 40% hike for cotton last year) and the 5% export incentive for raw cotton announced by the Government has pushed up domestic cotton prices further and our cotton will now be available to competing countries at rates lower than what the Indian industry pays. This incentive would only help a selected group of traders and hence should be withdrawn.

Man-made fibres currently attract customs duties which affect the cost competitiveness of downstream textile products. Since fibres are primary raw materials and can help in creating additional jobs in the textiles industry, the customs duties on all man-made fibres should be withdrawn, which will also help in reducing the mismatch between the global and Indian markets in the pattern of fibre consumption. In fact fibres are also subject to safeguard duty on account of antidumping measures and recently fibres imports also have been regulated through licensing. Needless to remind, fibres manufacturers operate in oligopolistic market.

Drawback and DEPB rates for textile products were reduced substantially in September 2008. The DEPB rates have subsequently been restored to the original levels as part of the stimulus package, in view of the crisis in the export front. Drawback rates, which are what the T&C industry uses mostly, should also be restored, for the same reasons. There is also a need for a mechanism for refunding the duties and taxes levied by state governments by integrating textile Industry in VAT chain or moving to GST on schedule in 2010 as tax suffered, amounts to around 2-3% percent of export value. China & Pakistan increased drawback rates after the global meltdown to support local manufacturers, due to which Indian textile industry is at a disadvantage over their competing countries, like China, Pakistan, Bangladesh etc.

The rate of interest in India is highest amongst industrialised nations and significant disadvantage for the export as well as industry in general especially for capital & working capital intensive industry like textiles. Lowering of interest rate to 7-8% is essential for revival and healthy growth of the industry. In addition, exporters should have to flexibility to borrow in foreign currency for their working capital requirements to avail benefit of lower interest rate and to be at par with the competing nations. Subvention for lending rates for exporters should also continue at least till March 2010 and subvention should increase from 2% at present to 4%. Availability of finance for textile companies also seems difficult in view of poor industry performance due to adverse operating environment. Banks should focus on future prospects instead of on past and restore normal flow of funds to the industry.