Manufacturers, govt unsure of when benefits of textile package will kick in

Mega package to boost textile industry delayed

The Rs 6,000-crore package announced by the government for the textile industry in July, and notified in September, would boost production and employment much later than it was estimated, textile manufacturers said.
 
Textile ministry officials, however, said there was no timeline for when the package was expected to deliver results. The recent Cabinet decision to widen the package beyond apparel manufacturing to ‘made-ups’, or home furnishings, has its roots in this uncertainty. Arguing it was early to look for benefits from the package, Alok Kumar, development commissioner (handlooms), said, “We need to wait for a few months for the results to become clear.” He added the made-ups sector allowed for larger labour absorption and had a greater scope for export growth.
 
Originally envisaged for the apparel manufacturing sector, the package has been slow to hit the ground with manufacturers blaming anaemic global demand as well as low investments in the sector.
 
The bulk of the planned capital outlay, an estimated Rs 5,500 crore, is expected to be spent on an additional five per cent duty drawback for garments. Duty drawback is a refund of duties on imported inputs for export items. The government hopes it will lead to a cumulative increase in exports of $30 billion.
 
One of the key factors likely to boost hiring, increased government funding for provident funds of new employees, has not started. The government now pays 8.33 per cent of the employer’s contribution and the textile ministry will provide an additional 3.67 per cent amounting to Rs 1,170 crore for first three years of employment.
 
“Investments will pick up only when global conditions become conducive and demand rises,” said N Parikh, chairman of the Confederation of Indian Textile Industry.
 
The new package is also out of sync with the manufacturing cycle in the garment sector. For apparel manufacturers, the festive season beginning August is the biggest draw, for which manufacturing ends by July. Hiring originally expected to pick up in October-January, when exporters meet demand from North America and Europe, have been slowed down by sluggish demand in global markets.
 
Industry bodies predict low global demand over the next few months. Exports of ready-made textile goods of all categories fell by more than two per cent in November.
 
While India’s textile market is large, the export business exceeds it. Made-ups like curtains, cushions and towels command a larger share of imports by developed nations. The share is nearly 50 per cent in the US. “We are waiting for the notification for the made-ups sub-sector,” said Siddhartha Rajagopal, executive director, Texprocil. However, industry insiders said no additional funds would be allocated for the sub-sector and that was a problem.