The CITI Chairman, Mr. Sanjay Jain, welcomes the budgetary allocation for textile sector of Rs. 7,148 crores in the Union Budget 2018-19 and the announcements pertaining to the MSME sector.
His response to some of the key budget announcements related to Textiles sector are as follows:
MSME Sector
Mr. Jain pointed out that the budget has given a big thrust to Medium, Small and Micro Enterprises (MSMEs) to boost employment and economic growth. In order to reduce the tax burden on MSMEs, the corporate tax has been reduced to 25% who have reported turnover up to Rs. 250 crores will benefit 99% of textiles sector as it’s primarily in the MSME segment.
The Finance Minister may soon announce measures to effectively address NPAs and stressed accounts for MSMEs which will have a far reaching impact on the textile industry.
Textile and Apparel Sector
Outlay for Textiles is Rs. 7,148 crore for 2018-19 against Rs. 6,222 crores last year.
Remission of State Levies (ROSL): The budgetary allocation for ROSL has been increased from Rs.1855 crores to Rs. 2164 crores. This will help the exporters of made-ups and apparels as backlog will be cleared and working capital released
ATUFS: For ATUFS also, the allocation has also been increased from to Rs. 2300 crores from Rs. 1956 crores. This would mean that companies will get their arrears faster.
Procurement of Cotton by CCI under Price Support Scheme: A large part of the increase has gone to CCI for performing MSP operations and hence won’t help the industry. The allocation has been increased from Rs 303 crores to Rs. 924 crores. It will benefit farmers but as market prices are higher than MSP in this year the budget may not be actually increased. Hence the actual fund allocation increase is just Rs 276 crores for the industry.
Basic custom duty on silk fabric increased to 20% from 10% would save the industry from dumping from China. The industry post GST is facing higher imports across the value added segment and was seeking increase in BCD across yarn and fabric, hence disappointed with this partial measure.
MSP on cotton
The MSP of all crops shall be made 1.5 times that of the production cost. This will benefit cotton farmers, however it will result in high inflation for the consumers of the country (as cotton constitutes 70% of the consumption) and the downstream segments. This would also make our industry uncompetitive internationally. Currently cotton MSP is 22.71% over A2 + FL (actual cost plus imputed value of family labour) which is Rs 3,276 per quintal as per CACP data. If we take this as base, it means another 22% increase which will make the industry uncompetitive and lead to high inflation of cotton textiles. The industry has been requesting to change from MSP to direct subsidy system, so that the profit protection measure of farmers doesn’t impact the textile consumer and the value added industry. Three years back, China has also converted from MSP system to direct subsidy system to reduce the huge stock pile which happened due to MSP being much higher than international prices.
EPF and Labour Reforms
Extension of fixed term employment for all segments which was earlier only for apparel and madeups and contribution of 12% of the wages of the new employees in the EPF for first 3 years is a welcome measure.
Others
Health Care Program-Modi Care will benefit textile workers and reduce the problem of absenteeism and cost of healthcare on workers.
Construction of 9,000 km of national highways by end of FY 19 and Rs 50 lakh crore for infrastructure development will enable smooth textile trade.
National Livelihood Scheme of Rs.5750 crores will benefit textile sector in rural areas.
Mr. Jain stated that several measures have been announced in the budget which will benefit the MSME sector. However, steps need to be taken to correct the imbalance caused by GST. The whole industry is being hit by imports post GST. The industry has been asking the Government for increase in import duty across the value chain (yarn and fabric) and it is a big disappointment for the industry that its recommendations have not been addressed.