The Union government on Wednesday announced a Rs. 6,000 crore special package for the textile and apparel sector.
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 at a media conference.
The package, approved by the Union Cabinet headed by Prime Minister Narendra Modi, 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 investment worth Rs. 74,000 crore in three years.
Finance Minister Arun Jaitley said China is gradually relinquishing its leadership position in the garment sector due to its rising wages and production shifting to high technology sectors. This, he said, is 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 is a strategic decision that would strengthen the Indian textile and apparel sector by improving its cost competitiveness in the global market, an official statement said.
Though India was the leader from the years 1995 to 2000, Bangladesh’s apparel exports exceeded that of India in 2003, while Vietnam surpassed India in 2011, a textile ministry presentation 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’ will be given for domestic duty paid inputs even when fabrics are imported under Advance Authorization Scheme,” the statement said.
The remaining Rs 500 crore is 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,” the textiles ministry said.
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, the textiles ministry said, adding that a fixed term workman will be considered at par with permanent workman in terms of working hours, wages, allowanced 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 garment industry, the ministry said.
Also, the government said it will bear the entire employer’s contribution of 12 per cent under the Employers Provident Fund Scheme, for new employees of garment industry earning less than Rs. 15,000 per month, for the first three years. This is an increase from the present Government provision of 8.33 per cent towards employer’s contribution provided under Pradhan Mantri Rozgar Protsahan Yojana, it said.
With Wednesday’s decision, Textiles Ministry said it will provide the remaining 3.67 per cent share towards employer’s contribution amounting to Rs 1,170 crores over the next three years. EPF will be made optional for employees earning less than Rs. 15,000 per month, it said, adding the move will leave more money in the hands of the workers and also promote employment in the formal sector.