Rajeev Gupta, CEO of RSWM Limited, has outlined several key expectations for the textile and manufacturing sector in the upcoming Union Budget. These suggestions are focused on addressing challenges faced by the industry and enhancing its competitiveness globally.
As the textile sector awaits the Union Budget, there are several recommendations to improve the industry’s viability and cost competitiveness. To begin with, raw materials prices in India are much higher than global rates since Indian companies deal with QCOs (quality control orders) on MMF (man-made fibres) and yarn. These non-tariff barriers restrict the free flow of raw materials, resulting in a shortage of specialized yarns and fibres, which in turn affects local prices. Therefore, the Centre should liberalise import policies to ensure a more competitive market for raw materials and lower or eliminate customs duty on MMF fibres and essential chemicals that are crucial in raw material production. Since specialised cotton (like organic and contamination-free varieties) is currently imported due to domestic unavailability, import duties to safeguard local farmers are hurting the textile value chains.
Another anomaly is the PLI (production-linked incentive) scheme applying only to synthetic fibre. To support textile and garment firms, the PLI must apply to the entire industry, which will incentivise greater investments. The government must reinstate the Technology Upgradation Fund Scheme, which offered subsidies for new machinery but was discontinued earlier.
Also, the cotton procurement scheme under MSP (minimum support price) should be replaced with a DBT (direct benefit transfer) programme. This will benefit cotton farmers with more liquidity as they can sell produce without awaiting official procurement. Price volatility to be addressed by creating a Cotton Price Stabilisation Fund, which will ensure the competitive availability of raw materials. An extended credit limit period of eight months (instead of three) for cotton procurement and an interest subvention scheme could also curb price volatility.
The industry finally seeks the deferment of Section 43B(h) of the IT Act, 1961. The new Section states that payments not received within 45 days by an MSME unit from a company will be considered part of the company’s business income and subjected to tax in the current financial year. Although meant to protect the interests of MSMEs, it overlooks the fact that the credit period at different production stages varies, typically being more than 45 days. The new rule has affected the entire textile value chain’s production planning and schedule. This law should be deferred and reintroduced later in a phased manner so the industry has ample time to adapt to its changes.
