October 3, 2022
  • October 3, 2022

India’s Budget 2022-23: Will the demands of the textile industry be met?

By on January 31, 2022 0
India’s textile industry hopes its demands will be met in the Union Budget 2022-2023, which is expected to be presented by Finance Minister Nirmala Sitharaman to Parliament on February 1. under the Technology Upgrade Fund (TUFS) program to settle thousands of ongoing cases.

During the pre-budget discussion, the textile industry submitted a long wish list of non-fiscal issues. Several textile industry organizations, including the Confederation of Indian Textile Industry (CITI), have also raised the issues of the National Textile Fund, the cotton price stabilization fund scheme, contract farming for specific varieties of cotton, the Hank Yarn obligation and the cotton technology mission.

According to industry representatives, a large number of claims are pending payment in ATUFS and other similar programs such as TUFS, MTUFS, RTUFS and RRTUFS. In the budget for the financial year 2021-2022, ₹700 crore was allocated for ATUFS, and there was no provision for the payment of pending claims in previous programs similar to TUFS. Over 40,000 such cases are pending payment.

India’s textile industry hopes its demands will be met in the Union Budget 2022-2023, which is expected to be presented by Finance Minister Nirmala Sitharaman to Parliament on February 1. under the Technology Upgrade Fund (TUFS) program to settle thousands of ongoing cases.

“As of August 1, 2021, there were over 12,000 cases attributed to UID under ATUFS. Of these, physical verification was performed in 6,452 cases, but only 3,065 cases were approved. Therefore, there is a need to allocate adequate funds to the Ministry of Textiles to help the industry recovering from the COVID pandemic crisis,” according to industry representatives.

Although the program expires on March 31, 2022, funds must be allocated for the payment of ongoing cases. The industry has suggested that when the ATUFS expires, an alternative regime extending benefits to textile machinery manufacturing and upgrading of the spinning segment could be devised with industry-friendly guidelines, such as provided for in other schemes such as RoSCTL and RoDTEP, to facilitate the conduct of business, create new manufacturing infrastructures and generate new jobs.

Industry organizations have also called for the revival of the Technology Mission on Cotton (TMC) program. In the new TMC program, mini-missions of cotton technology development, technology transfer, cotton fiber manufacturing and Indian cotton branding can be set.

The industry suggested that it was necessary to increase cotton production by 50%. The Cotton Advisory Council had also proposed the same a few years ago. For this purpose, it is necessary to allocate ₹1,000 crore for the first and second mini-missions. An allowance of ₹500 crore is required for the third and fourth mini-missions.

The Original TMC program, launched in 1999, helped the country rapidly increase cotton production, which contributed to the growth of the textile industry in the country. But after the program closed, cotton productivity began to decline as cotton became a priority for the Ministry of Agriculture. Now, it has become necessary for cotton to get back into mission mode.

In the 2022-2023 budget, industry associations also sought alternative solutions to address the problem of the reverse duty structure in the textile value chain. The GST Board had decided to increase the duty on fabrics and garments (below MRP of ₹1,000) from 5% to 12%. But this decision was postponed after strong opposition from MSME units in the textile sector. The industry said that the textile sector is going through a crisis due to the Corona pandemic and is only operating at 60-65% of its capacity, and that around 15-20% of the garment units are closed or have reduced their production due to a drop in demand. For the middle and working classes, hard hit by the pandemic, discretionary spending like clothing is not their priority due to job losses and wage cuts.

There has also been a request for modification of the Emergency Loan Guarantee Scheme (ECLGS) launched for industries facing liquidity problem during the COVID-19 crisis. The industry suggested removing the current total loan limit condition of ₹500 crore and the additional loan cap of ₹100 crore in ECLGS 2.0. Many textile companies had invested heavily in establishing integrated textile manufacturing units before COVID-19. Thus, these units are facing a financial crisis.

Given the requirement for hand weaving units in the country, it is a decades-old obligation for spinning mills making loom yarn to produce 30 percent hank yarn for the domestic market. They are also mandated to produce 80% skein yarns under 80 stitches. The industry demanded that the consumption of skein yarn should be reduced due to the shrinking hand loom sector in the country, hence the obligation of skein yarn should be reduced from 30% to 15%. Industry bodies have said that contract farming should be allowed for the production of organic cotton, naturally colored cotton and extra-long staple (ELS) cotton. Promoting organic cotton cultivation will reduce the impact of agrochemicals on land and water and improve soil quality.

There has been a request to introduce a Cotton Price Stabilization Fund to deal with the volatility that occurs from time to time in the price of cotton. The scheme suggested an interest subsidy of 5 percent, a reduction in the money margin from 25 percent to 5 percent and an increase in the credit limit from 3 months to 9 months. This will increase the growth rate of the textile industry by 2-3%. It was also recommended to make an allocation in the budget for the National Textile Fund which is being actively scrutinized by the Ministry of Textiles.

The textile industry has also requested relief under the provisions of Section 80JJA of the Income Tax Act. This article allows the deduction of 30 percent of the additional salary paid to new regular employees for a minimum of 240 days of employment in a unit of at least 50 employees. The industry demanded that the minimum period of employment be reduced from 240 days to 150 days. The request was also raised to modify the support program linked to production and employment for the garment unit (SPELSGU).

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