SIMA submits proposal of measures to textile minister

June 16, 2009 - India

Memorandum submitted to Thiru. Dayanidhi Maran, Hon’ble Minister for Textiles, Government of India during his visit to SIMA on June 16, 2009.

We are extremely thankful to the Hon’ble Minister for sparing his precious time to visit our Association soon after assuming the portfolio of Textiles.

Sir, our Association (SIMA) celebrating its Platinum Jubilee this year, is the single largest employers’ organization representing the organized textile industry in the country and plays a lead role in all policy making committees at State and Central level pertaining to the textile industry. Our member mills are scattered in all the four Southern States of the country and also in few States in the upcountry.

Indian textile and clothing industry is the mother industry of our country accounting for 4% of the country’s GDP, 14% value addition in the manufacturing sector, fetching US $ 22.4 billion exports (accounts for 12% of the country’s foreign exchange earnings). The textile industry is the second largest employment provider in the country (next to agriculture) employing over 90 million people directly and indirectly and plays a critical role in the growth of the economy.

The Indian textile industry, which had many ups and downs in the past, fully geared itself from 2003 due to various proactive measures and innovative schemes implemented by the Ministry of Textiles viz., Technology Mission on Cotton, Technology Upgradation Fund Scheme, Scheme for Integrated Textiles Parks, export incentives, rationalization of fiscal levies particularly the optional route in excise duty for cotton textiles. The textile industry attracted an investment of Rs.1,55,704 crores as on 31st December 2008. The investment has been doubling year after year during 2003 to 2007 and the industry became a sunshine industry.

From the beginning of 2007, the unprecedented global economic melt down coupled with various negative steps initiated by the Government like 40% increase in the Minimum Support Price (MSP) for raw cotton, 5% export incentive for cotton exports, bulk discount offered by CCI, drastic reduction in export incentive, heavy backlog in government dues, hardening of bank interest rates, etc., have paralyzed the performance of the Indian textile industry.

Even the best performing mills in the country have incurred huge cash losses for the last two years. Under these circumstances, the industry needs a comprehensive bail out package to bring the industry back on wheels and achieve the investment target of Rs.1,55,000 crores, 7 to 8% growth and creation of 10 million new jobs as set by the Hon’ ble Minister.

We humbly submit the following proposals for the kind consideration of the Hon’ble Minister, as they are immediately needed for the textile industry:-

1) Raw Cotton
• Relax working capital norms specifically for cotton
- 7% interest rate as against PLR at present
- Reduce the margin money from 25% to 10%

- Increase the credit limit period of 3 to 6 months to nine months

• Withdraw 5% export incentive offered for cotton and also curtail the bulk discount sales as practiced by the CCI and NAFED which benefited only the cotton traders and the competing countries like China, Pakistan, Thailand and Bangladesh.

• Streamline the roles of CCI and NAFED particularly the procurement and sales policy and ensure that the benefits reach only the cotton farmers and the industry and not the handful number of traders as happened during the current cotton season.

• Revamp the minimum support price for raw cotton on a scientific basis so that the interests of both the cotton farmers and the textile mills are taken care of.

2) Manmade Fibres
Withdraw import duty and the central excise duty on manmade fibre including their intermediaries so as to benefit the weaker section of the people. Since the cotton textiles have become expensive, the poorer section of the society can afford only the synthetic textiles. Currently, the consumption of cotton and synthetic textiles in India is only in the ratio of 60:40 as against the reverse globally.

3) Considering the undue delay in reimbursing TUF interest subsidy and erode the working capital of mills, either make the interest subsidy as nett of interest or convert all the Government dues including TUF subsidy, TED etc., into working capital margin money.

4) Relax the banking norms particularly for CDR proposals and moratorium on repayment of term loans so that NPAs are avoided and also extend the repayment period for TUF loans to 15 years.

5) Export Incentive
• Reinstate the interest subvention of 4% on export credit effective from October 2008.
• Increase the duty drawback taking care of all State levies, cross subsidies, surcharges on power and other infrastructural cost including transport so that the Indian textile and clothing products are made competitive in the global market.

6) Withdraw excise and customs duty on all liquid fuel meant for power generation by the textile industry ( Tamil Nadu alone accounts for 1/3rd of the textile business in the country facing 50% power shortage and the trend is likely to continue for another three years)

7) Refund accumulated Cenvat Credit

We fervently hope that the Hon’ble Minister would favourably consider our above submissions and announce a comprehensive package for the mother industry and make this industry most vibrant in the coming years.