ASSOCHAM submits pre-Budget proposal on textile sector

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With the textile sector’s crucial role in the growth of the fashion and retail industry, a strong plea has been made to the government to reduce cost and attract fresh investment in the textile industry in the General Budget next month, with a tax holiday being declared for foreign and domestic investors in textile machinery segment.

In a proposal to the ministries of finance and textile, the trade body Associated Chambers of Commerce and Industry of India (ASSOCHAM) sought reforms to minimise procedural and bureaucratic hurdles, and introduce the Chinese method of compensation by linking wage bill with output level.

It said that along with the policy initiatives, firm-level changes were also needed to strengthen the production base of the textile sector.

Planning tools like materials requirements planning (MRP) and just-in-time (JIT), which are almost non-existent in India, need to be introduced with some adaptation to the Indian scenario.

Assocham head Venugopal N Dhoot asked the government to further open up the textile sector without delays, by reducing customs duty on import of textile machinery and equipment for at least five years. He sought removal of excise duty on domestic production as this would promote healthy competition and also encourage the research and development in the segment.

The ASSOCHAM chief stressed that though there are a large number of schemes for the various sub-segments of the textile industry, there was need to bring all of them under single umbrella to realise the actual benefits. The non-performing schemes should be scrapped and adequate budgetary provisions made for the schemes doing well.

With the rupee growing strong against the American dollar, Dhoot said, “the government should put in place a mechanism to reimburse the non-cenvatable transaction costs and levies borne by the textile exporters, which was in the range of 12 per cent of FOB value of exports.”

Easing the interest rates on export credit, premium for export insurances, speeding up the clearance of excise duty and central sales tax reimbursement would not only cushion the losses of textile importers, but would also provide a boost to the exporters, he said.

As a major portion of India’s textile and garments exports are to the United States and the European Union, the government should provide incentives to the textile exporters to explore markets with high-growth potential to establish strong foreign trade in these areas in the long term.

The government should also provide special incentives to the firms going global to form joint ventures and partnerships, as this would not only help in expanding the market and creating brand value, but also cater to the latest technology needs of the industry, Dhoot said.

– Sri Krishna

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