Does The 6000 Cr Package Mark Revival Of Ailing Textile Industry?

The Finance minister Mr.Arun Jaitely has given his approval to a Rs. 6000 Cr package for revival of sick textile industry in a meeting chaired by the Prime Minister Mr. Narenda Modi. This move is a big step for the sector as well as the economy of the country. The package not only aims at providing financial aid to the industry that has been flailing for years but also strengthen it with labour law reforms, duty drawbacks and other incentives.

There is a visible effort to encourage employment and reduce red tape burden on this sector. If these initiatives show positive result then it could mean a bright future for the Indian textile industry which is right now facing a tough competition from other countries especially China Bangladesh and Vietnam. With labour reforms in China resulting in an increase in labour wages and consequently the cost of production coupled with the economic slowdown, this seems to be the right time for massive textile industry reforms in India.

Salient features of the package:-

1)    Increase in Overtime

The major change is an increase in overtime at up to eight hours a week which will give more earning opportunities to the labour force. This measure is also in line with ILO regulations. Considering that 70% of the workers in the textile sector are women, this is a very big step towards empowering them. This step should also result in higher productivity.

2)   Status of fixed-term workers

Textile sector is largely seasonal and therefore employs a large workforce on fixed term basis. The reforms shall consider fixed-term workers at par with permanent in terms of and purpose of working hours, wages, allowances and statutory dues.

3)   Relief from EPF contributions

For the first three years, the burden of employer’s contribution pegged at 12% to employee’s provident fund would be borne by the government. This measure applies to all new employees hired who are earning less than Rs. 15,000 per month. Also, contribution to EPF shall be optional for those earning less than Rs. 15,000 per month thus reducing a financial commitment and increasing the take-home salary .

4)   Tax deductions

A number of steps are being taken under this scheme to reduce the tax burden on textile units. One of them is reducing the applicability criterion of 240 days (to 150 days) for hiring permanent workers for claiming tax deductions. A mechanism for claiming a refund on VAT and CST is also being set up which will benefit the textile industry immensely.

5)  Output based incentives

The government has increased the subsidy from 15% to 25% for the garment sector under amended-TUFS to boost employment generation. This move also ends the era of input based incentives as from now on it will be the output that would form the basis of claiming subsidies.
The government envisages the generation of over one crore jobs over a period of three years, export earnings of $30 billion and attracting investment of $11 Billion through the reforms.

Textile secretary Ms. Rashmi Verma shared “We will overtake Vietnam and Bangladesh in garment exports within next three years if we properly implement the package,".

The goals of this package though ambitious are definitely attainable if executed in the right spirit in the coming days.