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ASSOCHAM urges government to revive textile sector

21 Oct '08
5 min read

ASSOCHAM demands that the government should draft a 5 year targeted agenda and work jointly with industry and labour unions to refine the stringent labour laws in a phased approach towards the integrated development of industry and work force.

Vocational training institutes should be developed in the rural and sub-urban areas by the government to provide the working knowledge of textile designing, weaving and spinning through short term courses, as the sector witness lack of skilled manpower, suggests ASSOCHAM.

The high cost of credit is forcing textile companies to postpone their expansion and modernization plans as they are unable to pass the cost to the customers, said ASSOCHAM.

In a measure to check inflation, the Reserve Bank of India on August 1, 2008 called off the export incentives (the interest subvention scheme), with effect from September 30, 2008. The withdrawal has stepped up the pressure of manufacturing costs with high prices of cotton and shortage of power, shying away consumers from spending on new textile products.

These measures are creating obstacles in the path of textile sector growth, making it uncompetitive and loosing market to Vietnam, Bangladesh and Combodia, said ASSOCHAM.

ASSOCHAM suggests that the interest subvention scheme for the textile sector needs to be continued up to March 2010 without any changes. As per the scheme the exporters were compensated for reduced profits because of strengthening rupee and got a near 4.5 per cent relief in pre-shipment and post-shipment credit.

The Asian counterparts including China and Pakistan are offering fiscal and monetary assistance to the sector, like China has increased the rates of VAT refund from 9 per cent to 13 per cent for synthetic textile products, ASSOCHAM, feels that the Indian government also needs to provide R&D, fiscal and monetary assistance to the sector.

Cotton, which accounts for almost 74 per cent of total yarn output, have witness drop in production from 250 million kg in July 2007 to 240 million kg in the same month of 2008.However, on a monthly basis, ASSOCHAM observed that price of raw cotton has increased by 51.2 per cent from Rs. 49.33 per kg in August 2006 to Rs. 74.57 per kg in August 2008.

In light of the current crisis ASSOCHAM suggests that government should reduce the MSP for cotton, as yarn producers are unable to purchase the stock for the complete period.

The textile units across states of Maharashtra, Andhra Pradesh, Tamil Nadu and Kerela are facing power supply crisis with interrupted and low quality electricity with costlier supply. ASSOCHAM suggests state governments to support the sector by providing power at subsidized rates.

ASSOCHAM feels that complementary infrastructure like multi modal connectivity of the textile parks to ensure uninterrupted supply chains and provision of power; water need prime attention of the government.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM)

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