The Centre announced a Rs.6,000-crore special package, with tax and production incentives, for the textile and apparel sector to enable domestic firms to compete globally.
The package which will be implemented soon aims to help in creating one crore jobs, mostly for women, in the next three years, said Textiles Secretary Rashmi Verma.
The package, approved by the Cabinet , includes several tax and production incentives. The government has also suggested bringing in flexibility in labour laws to increase productivity. These initiatives are expected to lead to an increase in exports by $30 billion and help attract investments worth Rs.74,000 crore in three years.
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Finance Minister Mr. Arun Jaitley said China was gradually relinquishing its leadership position in the garment sector due to its rising wages and production shifting to high technology sectors. This, he said, was leading to garment sector firms shifting to countries including Bangladesh and Vietnam. “Economies of scale can happen in India. Through changes in schemes and regulations, we are ensuring that the sector realises its full potential in India,” he said.
The package would strengthen the Indian textile and apparel sector by improving its cost competitiveness in the global market, according to an official statement.
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Compared with Bangladesh and Vietnam India was the leader in apparel exports between 1995 and 2000. Bangladesh’s apparel exports exceeded that of India in 2003, while Vietnam surpassed India in 2011, Textile Ministry data showed. With policy support, India can again regain its position in the next three years, it said.
Of the Rs.6,000 crore package, Rs.5,500 crore is for an additional five per cent duty drawback for garments. “In a first-of-its-kind move, a new scheme will be introduced to refund the state levies which were not refunded so far. Drawback at ‘all industries rate’ would be given for domestic duty paid inputs even when fabrics are imported under ‘Advance Authorization Scheme,’ according to the statement.
The remaining Rs.500 crore will be for additional incentives under Amended Technology Upgradation Funds Scheme (ATUFS), where the subsidy provided to garmenting units under the scheme is being increased from 15 per cent to 25 per cent, providing a boost to employment generation.
“The package breaks new ground in moving from input-based to outcome-based incentives; a unique feature of the scheme will be to disburse subsidy only after expected jobs have been created,” according to the ministry.
To ensure increased earnings for workers, the package specifies that overtime hours for workers shall not to exceed eight hours per week — in line with International Labour Organisation norms.
Taking note of the seasonal nature of the garment industry, fixed term employment will be introduced for the sector and a fixed term workman will be considered at par with permanent workman in terms of working hours, wages, allowances and other statutory dues.
Considering the industry’s seasonal nature, the provision of 240 days under Section 80JJAA of Income Tax Act (allowing deduction of 30 per cent of additional wages paid to new regular employees for three years where the worker has worked at least for 240 days in a previous year) would be relaxed to 150 days for the garment industry, the Ministry said.
Also, the government said it will bear the entire employer’s contribution of 12 per cent under the Employees’ Provident Fund Scheme, for new employees of garment industry earning less than Rs. 15,000 per month, for the first three years.