Textiles sector disappointed, says hasn't got its due

The new Foreign Trade Policy (FTP) announced by the government on Wednesday has left the textile sector disappointed.

"The government has fairly ignored the textile and clothing sector, the second-largest employment provider in the country and whose contribution to the country's growth has been well recognised by the Economic Survey. In terms of strengthening the manufacturing base, promoting exports and generating employment, the sector hasn't got its due in the FTP," said R K Dalmia, chairman of the Cotton Textiles Export Promotion Council.

The sector will, however, benefit from some of the measures announced in the policy. Under the Merchandise Exports from India Scheme (MEIS), man-made fibre yarn, woven fabrics and knitted fabrics typically have a two per cent reward in regions such as the US, the European Union and Japan, those not in China, Bangladesh, Turkey, Vietnam, South Korea, etc, major destinations for these products. In the case of garments, a two per cent reward has been provided for most products. The reward is convertible into relaxation in service tax, excise and customs duties; it is also transferable.

Duty scrip of two per cent has been granted to mainstream cotton textile products, though higher rates have been announced for handlooms, carpets and coir products under the MEIS. Sectors such as cotton yarn has been ignored, even as export of these products has declined sharply. Also, exports to Latin American markets face high logistic costs.

Without adequate support to handloom and coir products, the high export targets set by the government would be unachievable, said Dalmia.

The FTP did not touch upon an extension of interest rate subvention, needed to partly compensate high capital costs. Despite growing opportunities for textile products such as yarn, fabrics and made-ups in China, the government has not included these for pursuing market access negotiations with that country. If the rates on fabrics exported to China are reduced from the current 10 per cent to at least five per cent, exports to China will rise substantially.