Fibres and Yarns

To make import of cotton yarn duty-free, PLI scheme will be introduced for cotton textiles in the upcoming Budget

Published: January 28, 2022

Union Budget 2022-23: As far as the Indian textile industry is concerned, it is currently staring at the dawn of a bright future.

For the pandemic-hit Indian economy, the upcoming Union Budget is a beacon of hope for the future filled with optimism, strengthened by the abstinence lessons learned from the mayhem causing COVID-19. The focus of the Budget is expected to be on-demand generation and job creation which are the pillars of robust economic growth. In this light, it is expected that the annual budget exercise is a roadmap for economic recovery by ensuring tax and policy stability.

With the slowdown in China, an apt time to provide sops for the textile industry

As far as the Indian textile industry is concerned, it is currently staring at the dawn of a bright future that upholds the promise of growth. The recent China+1 policy adapted by manufacturers in addition to the slowdown in China will enable sourcing destinations such as India to grab a significant share of the global textile market.

Our manufacturing prowess coupled with ease of access to raw materials and labor force has already made us a preferred destination for sourcing by leading global brands of repute to source products. It is the opportune time for the government to provide desired support in terms of sops to the textile industry to propel its growth further and significantly enhance the industry’s position globally.

The textile and apparel industry contributes majorly to export earnings and employment generation, is expecting changes in taxes, PLI scheme, and customs duty in the upcoming Budget. The garment and fabric export industry suffered heavily last year due to an over 100 percent increase in cotton fiber prices.

This crisis was further accentuated due to the levied 10 percent customs duty on the import of cotton fiber. To ease supply, this duty should be revoked. Also, since cotton yarn prices have increased by about 78 percent, this year has had an impact on the sector significantly. If the import of cotton yarn is made duty-free it would help in increasing supply domestically.

Extend RODTEP scheme for deemed exports

Last year, the government re-introduced the Rebate of State and Central Taxes and levies (ROSCTL) for Garment exports and Remission of Duty and Taxes on Export Products (RoDTEP) for the yarn and fabric industry. These schemes helped the industry to get rebates of embedded central and state taxes. Additionally, to encourage value-added exports wherein the fabric export is converted to garment export, the RODTEP scheme should also be extended for deemed exports. Further to boost exports, the ROSCTL scheme should be extended also to advance license so that the garment manufacturers are encouraged to buy fabric for their exports indigenously.

To combat the shortage of short-staple spinning capacity in the country, a PLI scheme should be introduced for cotton textiles. Sops for Textile parks in terms of capital expenditure on utilities like ETP etc. can enhance price competitiveness.

The consumers and trader associations had expressed their displeasure on the GST hike on textiles and apparel, urging the government to reconsider its decision. The Indian textile industry has bounced back very strongly this year compared to last fiscal with the restrictions and lockdown in certain cities. India’s T&A exports are estimated to have increased to $40 billion. The industry exports are growing at a healthy level of approximately 20 percent registered in all segments from fiber, yarn, fabric, apparel to home textile, etc.

With a goal to achieve T&A exports of 65 billion and above by 2025, there is a dire need for radical reforms that just do not address recovery but accelerate the pace of growth for the Indian economy.

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