India Budget 2022-23: Will textile industry demands be met?

During the pre-Budget discussion, the textile industry had submitted a long wish-list of non-tax issues. Several textile industry organisations including the Confederation of Indian Textile Industry (CITI) also raised the issues of National Textile Fund, Cotton Price Stabilisation Fund Scheme, contract farming for specific varieties of cotton, Hank Yarn Obligation, and Technology Mission on Cotton.

A large number of applications are pending for payment in ATUFS and other similar schemes like TUFS, MTUFS, RTUFS and RRTUFS, according to industry representatives. In the Budget for financial year 2021-22, ₹700 crore was allocated for ATUFS, and there was no provision for payment on pending applications in previous schemes similar to TUFS. More than 40,000 such cases are pending for payment.

“As of August 1, 2021, there were more than 12,000 UID allotted cases under ATUFS. Of these, physical verification was done in 6,452 cases, but only 3,065 cases were approved. Therefore, it is necessary to allocate adequate funds to the Ministry of Textiles to help the industry that is recovering from the crisis of the COVID pandemic,” according to industry representatives

Though the scheme is expiring on 31 March 2022, funds are required to be allocated for payment of pending cases. The industry suggested that upon expiry of ATUFS, an alternate scheme extending benefits to textile machinery manufacturing, and modernisation of spinning segment could be devised with industry friendly guidelines, as provided in other schemes like RoSCTL and RoDTEP, to enable ease of doing business, create fresh manufacturing infrastructures and generate new employment.

Industry organisations have also urged for the revival of the Technology Mission on Cotton (TMC) scheme. In the new TMC scheme, mini missions of cotton technology development, technology transfer, cotton lint making and branding of Indian cotton can be fixed.

The industry has suggested that there is a need to increase cotton production by 50 per cent. The Cotton Advisory Board had also proposed the same few years back. For the purpose, there is a need of allocation of ₹1,000 crore for the first and second mini missions. An allocation of ₹500 crore is required for the third and fourth mini missions.

The Original TMC scheme, which was started in 1999, helped the country to rapidly increase cotton production, which helped the growth of the textile industry in the country. But after the closure of the scheme, the productivity of cotton started declining as cotton came down in the priorities of the Ministry of Agriculture. Now, it has become necessary for cotton to go into mission mode again.

In Budget 2022-23, industry associations have also sought alternative solutions to address the issue of inverted duty structure in the textile value chain. The GST Council had decided to increase the duty on fabrics and garments (below MRP of ₹1,000) from 5 per cent to 12 per cent. But this decision was postponed after strong opposition from MSME units of the textile sector. The industry said that the textile sector is going through a crisis due to the Corona pandemic and is working at only 60-65 per cent capacity, and around 15-20 per cent garment units are closed or have reduced production due to lower demand. For middle and lower classes, who are badly hit by the pandemic, discretionary expenditure like garment is not their priority due to job loss and salary cuts.

There has also been a demand for amendment in the Emergency Credit Loan Guarantee Scheme (ECLGS) started for the industries facing liquidity problem during the COVID-19 crisis. The industry has suggested to remove the condition of total outstanding loan limit of ₹500 crore and the additional loan ceiling of ₹100 crore in ECLGS 2.0. Many textile companies had invested heavily in setting up integrated textile manufacturing units before COVID-19. So, these units are facing financial crunch.

Considering the requirement of handloom units in the country, it is a decades-old obligation for spinning mills manufacturing weaving yarn to produce 30 per cent hank yarn for the domestic market. They are also mandated to produce 80 per cent hank yarn of less than 80s count. The industry has demanded that the consumption of hank yarn has come down due to shrinking handloom sector in the country, hence the obligation of hank yarn should be reduced from 30 per cent to 15 per cent. Industry bodies have stated that contract farming should be allowed for production of organic cotton, naturally coloured cotton and extra-long staple (ELS) variety cotton. Promoting organic cotton cultivation will reduce the impact of agro chemicals on land and water and will improve soil quality.

There has been a demand to introduce Cotton Price Stabilisation Fund Scheme to deal with volatility that comes from time to time in the price of cotton. The scheme has suggested an interest subsidy of 5 per cent, reduction of margin money from 25 per cent to 5 per cent and an increase of credit limit from 3 months to 9 months. This will increase the growth rate of the textile industry by 2-3 per cent. It has also been recommended to make allocation in the Budget for the National Textile Fund which is under active consideration of the Ministry of Textiles.

The textile sector has also sought relief in the provisions of section 80JJA of Income Tax Act. This section allows deduction of 30 per cent of the additional salary paid to new regular employees for a minimum of 240 days' employment in a unit with at least 50 employees. The industry has demanded to reduce the minimum period of employment from 240 days to 150 days. Demand has also been raised to amend the Production and Employment Linked Support for Garmenting Unit (SPELSGU) scheme.

Fibre2Fashion News Desk (KUL)