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What is your reaction to Union Budget 2020-21? How will it benefit the textiles and apparel industry?

Trade buzz: This could be a landmark budget
Finance minister Nirmala Sitharaman presented Union Budget 2020-21 in Parliament on February 1. Fibre2Fashion spoke to some major trade bodies to know their reaction.

 

On behalf of apparel industry I would like to thank the Prime Minister, the finance minister, the minister of textiles and the minister of commerce and industry for announcing a positive, progressive, growth-oriented and forward looking budget and also for fulfilling a long standing demand of industry of abolishing the anti-dumping duty on purified terephthalic acid (PTA). This will give the much-needed boost to the entire textile and apparel value chain. 

The AEPC congratulates the finance minister on effectively addressing some of the key issues of the sector especially in the areas of Ease of Doing Business. A dedicated Investment Clearance Cell proposed to be set up to provide 'end-to-end' facilitation and support 9,000 km of economic corridors, quality standard orders as per PM's vision of 'Zero Defect-Zero Effect' manufacturing, National Logistics Policy with single window e-logistics market with focus on generation of employment, 1.7 lakh crore for transport infrastructure in 2020-21, 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, 5-year exemption from audit for MSMEs, and easing of tax filing for startups are some important steps towards easing the day-to-day functioning of MSMEs and providing a conducive ground for investors.

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.

I am happy over abolition of anti-dumping duty on PTA which is a basic raw material of the man-made fibre (MMF) segment. If the Indian textiles industry has to achieve the market size of $350 billion by 2025, it couldn't have been done without making raw material available at an internationally competitive price. Hence, the decision is a very welcome step in the right direction as it will help the downstream value chain to strengthen its position in the textile world map.

India imports significant quantity of technical textiles worth $16 billion every year. So, I thank the government for proposing the National Technical Textiles Mission with an aim to reverse this trend and to position India as a global leader in technical textiles.

I thank the finance minister for considering extension of the debt restructuring window by another one year for more than 5 lakh MSMEs. Government e-Marketplace (GeM) for creating a Unified Procurement System in the country for providing a single platform for procurement of goods, services and works will offer a great opportunity for MSMEs. I also thank the finance minister for removing dividend distribution tax (DDT) and decriminalise the civil offences under Companies Act.

The 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 furnishings, sportswear industry, sarees, dress materials, etc will all benefit greatly from this move. Kudos to the textiles ministry and the Prime Minister for this very bold step.

Other than this, there are several measures which could benefit the textiles industry, but which appear to be work in progress at this point of time - such as the National Technical Textiles Mission, a review of the Rules of Origin especially in the existing FTAs, a review of cheap imports of goods being made by the MSME sector, refund of all taxes and levies for exports, and making every district an export hub. The proposed financing of invoices of the MSME sector could again be a huge benefit to the industry, which largely comprises MSME units. If indeed all these plans fructify as per the stated goals and objectives, this could be a landmark budget for the industry. By and large, a round of applause to the ministry of textiles.

The Union Budget 2020-21 is a people-oriented budget, particularly for women. The allocation of 100 lakh crore for investment in infrastructure will help reduce the logistics cost, as poor logistics is a major hurdle in attaining export competitiveness by our units.

The setting up of National Technical Textiles Mission with an outlay of 1,480 crore would boost manufacturing of technical textiles in our country. The launch of a new scheme NIRVIK to achieve higher export credit disbursement, mainly to support small exporters, is also a welcome step.

Further, the removal of DDT and rationalisation of personal income tax are bold steps and will help across the board. However, the allocation to the ministry of textiles is 3,514.79 crore in the current budget, against the allocation of 4,831.48 crore in the 2019-20 budget. Fund allocation under ATUFS scheme is only 761.90 crore, while the pending claims to the industry is to the tune of 8,500 crore, which will not attract the industry to go for modernisation. We hope the government will consider and address the issue.

The budget has stated that the Scheme for Remission of Duties & Taxes on exported products will be launched this year, which will refund the duties and taxes levied at the central, state and local levels, such as electricity duties and VAT on fuel used for transportation, which are currently not getting exempted or refunded under any other existing mechanism. The implementation of this scheme will certainly go a long way in improving the competitiveness of textile products in the export markets.

The abolition of anti-dumping duty on PTA is an important decision, as it will make PTA available to the industry at competitive prices and give a boost to downstream value-added products.

The proposed National Technical Textiles Mission with a four-year implementation period from 2020-21 to 2023-24 at an estimated outlay of 1,480 crore will give encouragement to the technical textiles sector and provide the much-needed breakthrough in product development.

In addition, the decision to review the Rules of Origin under all FTAs, strengthening the safeguard measures to deal with surge in imports, and review of all customs duty exemptions will protect domestic manufacturers, which in turn will encourage 'Make in India' initiative.

I thank Prime Minister Narendra Modi for favourably considering the long pending demand of the industry and abolishing the anti-dumping duty being levied on PTA imported from different countries including China, Indonesia, Taiwan, Iran, Malaysia. PTA attracts anti-dumping duty from $27 to $160 per metric tonne depending upon the country of origin. India often faces shortage of PTA which curtails capacity utilisation of polyester segment of the industry. The announcement has come as a boost for PTA users and the entire man-made fibre textiles and clothing segment.

I also welcome the announcement of National Technical Textiles Mission. As our 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 ATUFS.

I appreciate the enhanced allocation of 761.90 crore for ATUFS, as against 700 crore allotted during the previous year.

I welcome 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 DDT paid by the companies, significant reduction in personal income tax rate, 'Vivad Se Vishwas' scheme enabling dispute settlement without any interest and penalty, and simplification of appeal provisions, GST returns, income tax returns, etc are also welcome features of the budget.

We welcome the three big structural reforms announced in the Union Budget 2020-21. Abolishing anti-dumping duty on PTA, a key raw material for the MMF industry, will be a big booster to Indian textile sector's export competitiveness. The decision is a first step towards bringing structural changes in the raw material eco-system. It will strengthen Indian textile sector's dream of capturing better market share in MMF and blended apparels. US market alone offers 3 lakh crore opportunity in MMF apparel. With such structural changes, Indian apparel sector can move towards capturing 10 per cent share of the US market as against the current share of 2.5 per cent.

The second big structural reform is regarding bringing suitable provisions in the Customs Act and reviewing the Rules of Origin requirements to ensure that there is no dumping through FTA route. This will help textile sector in a big way to face the rising imports of clothing into the domestic market.

The third big reform is the announcement of setting up of a National Technical Textiles Mission, which will help tap the huge potential of the sector.

Published on: 04/02/2020

DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.

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