The predominantly cotton based textile industry has become highly competent in terms of operational efficiency with state-of-the-art technology, skilled man power, high productivity and quality, etc. But the external factors are curtailing its growth and the industry is facing yet another long drawn recession for the last 15 months. Spinning and powerloom are the worst affected. Though various State Governments have announced attractive textile policies and aggressively marketing for attracting investments, these policies have become a major threat for the existing capacities to compete with the new capacities being created. In the absence of a level playing field due to higher rates of duties for Indian textile products in various major international markets, higher raw material cost, high cost of funding and high transaction cost, the industry is not in a position to achieve its potential growth rate. Under these circumstances, it is very essential for the Central Government to come out with a policy initiative to strengthen the competitiveness of the Indian textile industry. This would enable the industry to achieve the growth rate of 25 to 35 per cent in the short run and 20 per cent growth rate in the long run. This industry could achieve a business size of US $ 500 billion by 2025 from the current level of US $ 110 billion, if the right policies are in place.
Mr. T. Rajkumar, Chairman, The Southern India Mills’ Association (SIMA) has recently appealed to the Hon’ble Prime Minister to announce slew of policy initiatives to create a level playing field for the mother industry of the nation which employs over 110 million people to compete in the globalized environment and achieve the envisaged growth rate. Mr. Rajkumar stated that the industry could achieve over Rs.3.00 lakhs crores investments during the last 15 years and it has potential to attract Rs.2.00 lakhs crores in the next five years, if the right policies were in place. He stated that taking advantage of the surplus cotton, spinning capacity, fabric production capacity could be converted into a significant amount of foreign exchange which could greatly help the government to overcome the balance of payment issue.
Tariff Barriers
Mr. Rajkumar further stated that Pakistan, Vietnam and Cambodia have zero duty access for fabrics and five per cent duty for garments and made-ups in China while the Indian yarn attracts 3.5 per cent duty, fabric attracts 8.5 per cent duty, made-ups and garments attracts 14 per cent duty. He stated that Pakistan, Bangladesh and Cambodia have zero duty access in EU and Bangladesh and Cambodia have zero duty access in US. He pointed out that the global recession had pushed the Indian textile industry to the corner and India had become the least preferred Nation in textile trade due to higher rates of duties.
Mr.Rajkumar appealed to the centre to expedite FTAs with China, EU and other countries on a war footing and create a level playing field to enable India to grab the opportunities emerging in these countries particularly China which has already started cutting down its production. He pleaded the Hon’ble PM to extend three to five per cent incentive under Merchant Export Incentivization Scheme (MEIS) as an interim relief till the FTAs are signed to enable the Indian textile industry to compete in the global market and fully utilize the production capacity.
Raw material policy
SIMA Chairman heavily criticized the cotton trade policy of Cotton Corporation of India, which have been doing significant damages to the Indian textile industry particularly the SMEs, and favouring only the multinational cotton traders. He pointed out that CCI had procured major portion of good quality cotton produced in Telangana, Andhra Pradesh and parts of Maharashtra and hoarding the cotton for several months which made mills in these states to source cotton from other states and also could not fulfill the customer requirements. He also stated that CCI offered cotton in bigger lots which prevented SMEs to have direct access and these mills had to pay Rs.500/- and Rs.1000/- higher price per candy to the traders to purchase the same cotton. He thanked the Ministry of Textiles for its intervention based on the plea made by the industry and making CCI to offer in smaller lots.
Mr.Rajkumar said that China cotton policy had created turmoil in the global cotton economy and the problem could continue for some more time. He stated that India could export substantial yarn to China as it has been carrying high cost cotton. He added that China had recently taken a decision to provide direct subsidies to the farmers instead of MSP operations and allow the domestic industry to source cotton at international price. SIMA Chairman had appealed to the central government to announce similar policy so that the intervention of CCI could be avoided. He suggested that the subsidies could be directly given to the farmers. He stated that in the absence of such a decision, the government should immediately induct the industry representatives on the Board of CCI so that a win-win strategy could be ensured and the interests of the farmers and the industry could be protected.
SIMA Chairman also stated that the synthetic textile manufacturers were also in a bad shape as huge volume of yarns and fabrics were imported from countries like China, Indonesia and Thailand. He pointed out that around 23 per cent levies on synthetic fibers apart from the anti-dumping duty do not allow the Indian synthetic industry to grow. He appealed to the centre to immediately withdraw the anti-dumping duties and also to reduce the central excise duty from 12.5 to 6 per cent, remove five per cent import duty and four per cent special additional duty on synthetic fibers.
Technology Upgradation Fund Scheme
SIMA chief had appealed to the Prime Minister to allocate Rs.6,500 crores for Technology Upgradation Fund Scheme to clear all the pending subsidies and also existing commitments so that liquidity of the mills could be eased. Mr.Rajkumar thanked the Hon’ble Chief Minister of Tamil Nadu for having taken up the issue of TUFS with the Prime Minister when he met her recently and submitted a memorandum seeking to allocate Rs.1,500 crores for Tamil Nadu mills under the scheme.
Tamil Nadu Textile Policy Initiatives
Regarding Tamil Nadu State textile policy, SIMA Chairman appealed to the Hon’ble Chief Minister to reduce the VAT on cotton cone yarn from five to two per cent, remove one per cent market committee fee levied on cotton and cotton waste to enable the Tamil Nadu weaving and knitting segments to fully utilize the yarn produced in the state and convert them into value added products. He stated that two per cent CST was the root cause for the weavers and knitters to source yarn from other States and also for the spinners to sell their yarn in other states. Mr. Rajkumar stated that Tamil Nadu would continue to be the hub for the textile manufacturing and value added products if the state government comes out with special policy initiatives aiming at attracting investments in processing, garmenting and made-up segments as the state had already around 50 per cent of the country’s yarn production capacity, 70 per cent of cotton knitting capacity and 25 per cent of fabric production capacity. Mr. Rajkumar pointed out that textile policies announced by various state governments and abundant availability of home grown cotton provide a cost advantage of Rs.20 per kg of yarn when compared to the spinning mills in Tamil Nadu. Therefore, he appealed to the Chief Minister to make suitable announcements in the forthcoming Global Investors Meet to make Tamil Nadu to remain as the hub for textile manufacturing.
SIMA Chairman stated at the member mills meet that it was unanimously decided to cut the production by 15 to 20 per cent in the short run in consultation with spinning mills situated in North India and other parts of the country. It was also proposed to observe one day Nationwide production stoppage to draw the attention of the Central Government, announce the textile policy, extend Merchant Export Incentivization Scheme till FTAs are signed and more importantly allocate necessary funds to clear all the pending TUF subsidies.
Mr. T. Rajkumar concluded by saying that the industry could sustain on its own and does not require any incentive if a level playing field is created on tariff rates, raw material cost, cost of funding and transaction cost.