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Urges Centre to seek duty-free access
The textile industry has urged the Centre to push for negotiations with China to provide duty-free access to Indian cotton textiles.
Sanjay Jain, chairman of the Confederation of Indian Textile Industry, said in a release that in 2017-2018, India exported textile goods worth $1,362 million to China. But imports from China were to the tune of $2,905 million, indicating a trade deficit of $1,543 million. Between 2010 and 2014, India was a net exporter of textile and apparel products to China. However, after that, India’s trade deficit with China was on the rise.
Indian products attract 3.5% (yarn), 10% (fabric), and 14% (made-ups) duty in China, while Vietnam, Cambodia, Pakistan, and Indonesia enjoy duty-free access to the Chinese market.
India’s cotton yarn exports to China have decreased 53% in the last five years, while Vietnam’s exports to China have increased 88%, he said.
The Indian textile industry is sensitive to even small changes and if it had a level-playing field as its competitors, Indian exports to China could double, he added.
Mr. Jain told The Hindu that China buys cotton fibre from India but prefers other countries for value added products, such as yarn and fabric. Even recently, when it cut import duty on several products, textiles were not included. “We do not need incentives (from the Government). FTAs and bilateral agreements will help exports. Refund of embedded taxes to exporters and trade agreements wherever possible are two policy changes that are needed to boost exports,” he said.
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Farmers and ginners are expecting cotton production of around 11 million bales this crop year against the official target of over 14 million due to poor quality seeds, late sowing, water shortage and low acreage in high-yielding region.
Officials were, however, upbeat on Saturday about the harvest level similar to that was achieved in 2017/18. Water availability has lately been picked up with relatively low onslaught of pests on cotton plants, they said.
Pakistan Central Cotton Committee data showed that the cotton sowing target of 2.95 million hectares has already been missed by around 10 percent as sowing could be completed at 2.66 million hectares of land. Punjab marginally remained short of target of 2.31 million hectares by planting cotton at 2.29 million hectares.
There was serious dent in cotton area under cultivation in Sindh where per acre yield was used to be far better than the national average. Record water shortage badly hit cotton sowing in the province.
Ihsanul Haq, chairman of Pakistan Cotton Ginners Forum said cotton production could be around 11 million bales this year as water scarcity affected the cotton production. Cotton production stood at 11.5 million bales in last season of 2017/18.
Haq said water shortage immensely hit Sanghar district which is the number one cotton producing district of the country. “It has never seen such low water availability.”
Farmers of the area were even forced to use bad quality groundwater to make cotton sowing possible.
The official data showed that crop cultivation in Sindh, during the current season, witnessed decrease of 31 percent as compared to corresponding period of the last season. Only 68 percent sowing has been recorded in the province compared with the target due to severe shortage of water. Farmers said around half of cotton planted this season was delayed due to historic low water flows, leading to slow place of cotton sowing. The late cotton sowing has been vulnerable to severe heat and rains and resultantly its production could be reduced, they added.
Khalid Mehmood Khokar, president of Pakistan Kissan Ittehad said cotton production could barely reach 10 million bales against the official target of 14.37 million bales. “If Punjab is able to produce six million bales and Sindh three million bales, I think it would be great achievement given the present bleak scenario,” Khokar, who is also a cotton grower from Multan.
He said white fly, mealy bug and cotton leaf curl virus (CLCV) have emerged as biggest threats to standing cotton crop. “I feel pity while seeing cotton scenario of the country,” he added. “There is no emphasis on improving seed development and marketing system in the country.”
A senior official of Punjab agriculture department argued that cotton crop is relatively better nowadays if compared with last year’s corresponding period. The official said there was water shortage during the sowing period, but later rains have helped in meeting irrigation needs of the crop. The provincial Directorate General of Pest Warning and Quality Control of Pesticides registered some pest incidences of white fly, jassid, thrips, mealy bug and CLCV in some districts of Punjab.
Textile industrialists have hailed the Union government for accepting their long-pending demand regarding refund of the input tax credit (ITC) on fabric. Kamal Dalmia, chairman, Focal Point Industries Association, said it was a welcome step that ultimately government accepted to refund the ITC on fabric. The government restored the refund on fabric, covered under notification number 5/2017 Central Tax (Rate), dated June 28, 2017, as amended by notification number 20/2018, dated July 26, 2018.
As per the said provision, the accumulated input tax credit up to the inward supplies received up to July 2018 and after making payment up July 2018 shall lapse. “This means no credit of tax will be given on the fabric stock lying as on July 31. It was a draconian order and a big blow on the traders of fabric,” Dalmia remarked. The notification ordering lapse of unutilised balance of the input credit against fabric was against the provision of law.
Another textile industrialist, DS Goraya, said, “While issuing the said notification, it was never considered what would be the position of unsold fabric lying as on July 31, 2018 on which the duty had already been effected at the time of the inward supply.” He maintained that there couldn’t be double taxation. So, they had requested that accumulated ITC should be allowed in the interest of the traders.
New scheme allows cooperative banks to lend to units for tech upgrade, LLP firms can also benefit; synthetic textiles to get a leg up
In a significant boost to the dwindling textile sector, the Union Ministry of Textiles has introduced Amended Technology Upgradation Funds Scheme (ATUFS) for wider financial and operational benefits for players in the entire value chain.
Introduced first in 1999 to replace age-old technology with brand new ones for improving operational efficiency of textiles units, the TUFS was revised and upgraded time and again to incorporate new players and encourage them bring in new investments in the sector. Industry sources estimate billions of rupees of new investment post TUFS introduction.
Notified on Thursday, the ATUFS allows co-operative banks to lend to textile units for technology upgradation under this scheme. The ATUFS, which is set to benefit the synthetic textile sector immensely, has also been extended to limited liability partnership (LLP) firms.
“The ATUFS is set to boost textile exports from India. It is a good initiative taken by the government, with expansion of a new class of financial and operational parameters. The scheme will also benefit domestic textile units,” said Ujwal Lahoti, Chairman, The Cotton Textile Export Promotion Council (Texprocil).
The Ministry of Textiles had launched ATUFS in place of the erstwhile Technology Upgradation Fund Scheme (TUFS) in 2016 for a period of seven years ending March 2022. The financial and operational parameters and implementation mechanism for ATUS were notified in February 2016.
The government provides credit-linked subsidy under the scheme.
Interestingly, the scheme was fraught with difficulties that were brought to the notice of the government. Keeping in view the hardships faced by the industry in getting benefits under the scheme and the demands raised by various stakeholders for streamlining it, the Ministry of Textiles for the first time allowed textile units to take advantage of this scheme in addition to other benefits availed from the state governments.
“This is yet another positive step taken by the Ministry of Textiles for strengthening the industry. This will also help generate employment and boost exports and facilitate improvement in productivity, quality, etc.,” said Narain Aggarwal, Chairman, The Synthetic & Rayon Textiles Export Promotion Council (SRTEPC).
Under the new scheme, applicants who had applied for the unique identification number (UID) under revised and restructured technology upgradation fund scheme (RRTUFS) before January 12, 2016 but to whom UIDs could not be issued for non-availability of funds, will be given a one-time opportunity to apply for subsidy under ATUFS.
The revised specification of technology for the machinery for all the eligible segments would be prescribed annually in advance by the technical advisory and monitoring committee (TAMC) effective from April 1 of the year. The revised guidelines allow Textile Commissioner to constitute a Technical Committee which will assist the TAMC to prepare an indicative list of manufacturers of machinery. This Committee will meet on monthly basis to update the list of machineries and manufacturers. Most importantly, accessories, attachments, sample machines and spares procured from other manufacturers enlisted in the indicative list will also be eligible for subsidy up to a value of 20 per cent of basic cost of machinery.
Except in the case of merger, acquisition, amalgamation or takeover of an entity, the plant and machinery bought with subsidy under TUFS shall not be disposed of before 10 years of the date of purchase without prior approval of the Textile Commissioner. The government has been assisting textile players with timely policy support. In June last year, it had announced a Rs 60-billion package which, according to the ministry of textiles, helped attract Rs 270 billion of fresh investment till early March 2018.
Apex industry body, the Confederation of Indian Textiles Industry (CITI), reported a four per cent decline in textile and apparel exports at Rs 2,279 billion for the financial year 2017-18 from Rs 2,382 billion for the previous year. While textile exports declined marginally by one per cent to Rs 1,202 billion at the end fiscal 2018 from Rs 1,217 billion a year ago, apparel exports saw a sharp drop of 8 per cent to Rs 1,077 billion as against Rs 1,165 billion in the fiscal 2017.
Highlights of the scheme
Limited Liability Partnerships will also be eligible for capital subsidy
Co-operative banks included as lending agency under the scheme
Textile Commissioner to set up Technical Committee to prepare list of machinery manufacturers.
Accessories, attachments, sample machines, spares also eligible for subsidy up to 20% of basic machinery cost
Except in merger or takeover, plant & machinery bought with subsidy under TUFS shall not be disposed of before 10 years
Textile units permitted to avail benefits of state govt schemes in addition to ATUFS benefits.
SURAT: Union textile minister, Smriti Irani said that the fabrics required for armed forces will be manufactured in India as scientists, textile ministry, industry and armed forces are working together for the ‘dream’ project.
Irani, who was in the city to inaugurate Yarn Expo-2018 organised by Southern Gujarat Chamber of Commerce and Industry (SGCCI) on Saturday, stated that the government has also appointed group of secretaries for transforming India as the textile machinery manufacturing hub.
More than the inauguration, the event provided the platform to the industry leaders to felicitate Irani. They praised her for taking a lead role in resolving the input tax credit (ITC) issue for the powerloom weaving sector, pending since last year. Irani informed that the National Institute of Fashion Technology (NIFT) and SGCCI will work in conjunction on the design diversification project for the city’s textile sector. The design diversification will not only help the manufacturers to get more value for their fabrics, but it will also increase the export potential of the fabrics manufactured in Surat.
Irani said, “It’s time to show to the world the true capacity and strength of Indian textile industry. The government has taken many proactive measures for the industry and now it’s time to work and prove that all our efforts in conjunction with the industry is going to pay off to the nation as a whole.”
President of Reliance Industries Limited’s (RIL), polyester chain, RD Udeshi said, “Surat is the main hub for polyester yarn consumption. But, we need to scale up our production to compete with China. In China, a single shed has more than 2,000 powerloom machines, while in Surat we have a maximum of 100. Now, that the government has announced relief under GST, it’s time to ramp up our production.”
SGCCI president, Hetal Mehta said, “This is first time that about 70 leading yarn manufacturers in the country are participating in the event. We will have about 7,000 buyers from across the country and 100 overseas buyers as well in the coming three days of the event.”
A group of ministers will prepare a report after hearing all the problems of MSMEs including tax refunds, the council said in its 29th meeting in New Delhi.
The Goods and Services Tax (GST) Council headed by Finance Minister Piyush Goyal approved setting up of a group of ministers (GoM) to tackle taxation related issues faced by micro, small and medium enterprises (MSMEs). It has also decided to incentivise digital transactions by giving 20 percent cashback on the tax paid to users of RuPay, and UPI platforms on a pilot basis.
The GoM, headed by Minister of State (MoS) for Finance Shiv Pratap Shukla, is expected to submit its report in the next six weeks on tax issues faced by MSMEs. Delhi Finance Minister Manish Sisodia, Assam FM Himanta Biswa Sarma, Bihar deputy Chief Minister Sushil Modi, among others, will be part of the panel.
A law committee comprising bureaucrats from states and the Centre will be looking at law related issues that MSMEs are dealing with. Similarly, a fitment committee, comprising senior government officials will consider proposals related to rate cut.
“All proposals will be reviewed by the ministerial panel in consultation with the law review committee and fitment committee,” Goyal said.
Punjab Finance Minister Manpreet Singh Badal said that the report will focus on enabling industries to be more competitive. It will try to find out the processes that are destabilising smaller players, he said and added that small companies have been bearing losses of up to 300 percent.
In its 29th meeting held on August 4, the Council considered all aspects of GST, while focussing on laws, simplification of the policy, reducing compliance burden and technology-related issues affecting MSMEs.
“There were concerns about MSME sector ever since GST was rolled out because in the earlier excise and service tax regime the businesses with (annual) turnover of more than Rs 1.5 crore were treated differently, while those of less than Rs 1.5 crore differently. There is big business who give more taxes, but then there are small businesses who are large in number, who gives employment. Both have to be given importance…with this, MSMEs will get the required support,” said Manish Sisodia.
The next GST Council meeting will be held on September 28 and 29 in Goa.
West Bengal FM Amit Mitra, who was also present at the meeting said it is estimated that government had to bear revenue losses of Rs 43,000 crore during the April-June quarter.
However, referring to the cut in GST on around 80 goods a senior official government said that rate cut may not happen for the time being as there are revenue concerns. “The view was that now GST Council should adopt RBI’s terminology of a pause in rate cut,” the official noted.
Revenues from GST in April-June was at Rs 2.86 lakh crore, as compared to an estimate of Rs 3.36 lakh crore, according to monthly data released by the government.
Incentivising digital transactions
The Council approved incentives for digital payments, with a broader idea to promote a cashless economy.
Payments made using instant real-time payment system Unified Payments Interface (UPI) and RuPay cards will get a cashback of 20 percent of the GST amount, Goyal said, adding the cashback will be capped at Rs 100.
The pilot programme will be implemented by National Payments Corporation of India (NCPI) and can be introduced by any state that is willing to run it voluntarily. Tamil Nadu, Assam, Maharashtra and Bihar are some of the states that are keen on implementing the pilot project.
The Centre and states will have to bear a loss of Rs 1,000 crore annually, towards giving sops for digital payments.
“…It remains to be seen how many states are interested in implementing the scheme and what is the monetary limit fixed on the benefit. Besides, the Banks and the Government will be required to put in place an appropriate software and infrastructure support to facilitate the cashback scheme,” said Abhishek A Rastogi, Partner, Khaitan.
Cheaper imports under World Trade Organization’s (WTO’s) generalized system of preferences, or GSP, help US firms, says India
India has made a final plea for continuation of the generalized system of preferences (GSP) benefits currently under review before the US Trade Representative (USTR), arguing that the cheaper imports of intermediary products from India enable availability of cost-effective and price-competitive inputs to the US downstream industries and helps the US firms remain domestically and internationally competitive.
The GSP programme allows duty-free entry of 1,937 products worth $5.6 billion from India into the US, benefitting exporters of textiles, engineering, gems and jewellery and chemical products.
In its initial submission during the hearing, India had threatened to drag the US to the dispute settlement mechanism of the WTO, claiming withdrawal of the GSP benefits would be “discriminatory, arbitrary and detrimental” to its developmental needs.
In its post-hearing submission, while answering the queries raised by the USTR GSP sub-committee and other US industry lobbies, India has maintained that GSP benefits are integral and catalytic in promoting the pace and sequence of domestic and external economic reforms in India. “It needs hardly be over-emphasized that the products on which India receive GSP benefits belong to sectors which employ several thousands of men and women, especially in rural areas through micro, small and medium enterprises. Furthermore, India’s GSP exports represent a minuscule part of the total imports of the United States and do not pose any threat or disruption to the US industry,” it said. Mint has reviewed a copy of India’s final submission before the USTR.
While the US has been trying to leverage the GSP review to gain more market access in India, India has at least through the written submission, made it clear that the benefits should be “unconditional and not contingent upon reciprocal market access for goods, services or other emerging areas of trade.”
However, India on Saturday deferred till 18 September tit-for-tat retaliatory tariffs against the 29 US products worth $235 million intended to counter a US move to unilaterally raise import duties on Indian steel and aluminium products. India’s move is seen as a conciliatory measure pending the GSP review and the upcoming “2+2” dialogue among their foreign and defence ministers on 6 September of the two countries.
US supermarket major Walmart in its submission to the USTR has come out in support of continuation of GSP programme for India, holding that it provides significant benefits to Walmart customers and US suppliers by reducing costs. “We support the administration’s efforts to work with GSP countries to concretely address market access and other GSP eligibility concerns but caution against undermining or weakening the significant policy and development benefits embodied in the GSP programme. Revoking GSP-eligibility from GSP countries risks undermining US interests and benefits from GSP while jeopardizing the significant development opportunities GSP has created for poorer countries and workers around the world,” it added.
The USTR in April announced that it is reviewing the GSP eligibility of India, along with Indonesia and Kazakhstan, after the US dairy industry and the US medical device industry requested a review of India’s GSP benefits, given India’s alleged trade barriers affecting US exports in these sectors. Total US imports under GSP in 2017 was $21.2 billion, of which India was the biggest beneficiary with $5.6 billion, followed by Thailand ($4.2 billion) and Brazil ($2.5 billion).
Simplification of GST is an ongoing process and lesser tax slabs will emerge in the long term, Sanjeev Sanyal, Principal Economic Adviser, Union Finance Ministry, has said.
According to him, there could be three major slabs which include a “low 5 per cent”, a 15 per cent slab covering most goods and services, and finally another with a rate of 25 per cent. Apart from these, there will be items included under a zero tax rate or exempted list, under GST.
Long-term possibility
“This is a tax structure that could be a possibility in the long term. I am not saying that this will happen tomorrow,” he said on the sidelines of an interactive session organised by the Bharat Chamber of Commerce.
The current GST rate structure has four tax slabs – 5 per cent, 12 per cent, 18 per cent and 28 per cent. Then there is a list of exempted category goods and services (which have no tax on it). There is also a set of luxury goods and services that carry a cess over and above the 28 per cent tax rate.
The Field Inspection and Scientific Evaluation Committee (FISEC), set up at the instance of the prime minister’s office (PMO), has submitted its report saying that the planting of unauthorised Herbicide Tolerant (HT) Bt cotton has soared to 15% of the total cotton area in Andhra Pradesh, Gujarat, Maharashtra, Telangana and 5% in Punjab during the 2017 kharif season.
So, now it is almost official that there is a thriving business in new cotton technology, the Bollgard-II with Herbicide Tolerant (HT) traits, a technology that is not yet officially approved by the government! The Field Inspection and Scientific Evaluation Committee (FISEC), set up at the instance of the prime minister’s office (PMO), has submitted its report saying that the planting of unauthorised Herbicide Tolerant (HT) Bt cotton has soared to 15% of the total cotton area in Andhra Pradesh, Gujarat, Maharashtra, Telangana and 5% in Punjab during the 2017 kharif season. Also, that farmers have been paying Rs 1000 to Rs 1500 per packet of 450 grams of seeds, despite an official cap on Bollgard-II seeds pricing at Rs 800/packet. Further, the FISEC findings also reveal that it has not been smuggled from outside the country, but has been manipulated with original varieties of Mahyco Monsanto Biotech Limited (MMBL), that were under trial through the official route, but were later withdrawn due to uncertainties over the trait fees with some licensee companies What all this indicates is the following: (a) on a good note, farmers want to have access to new technologies provided they benefit from them, and that they are ready to take risks to procure these seeds even through unscrupulous dealers at a substantially higher price than fixed by the government; (b) on a flip side, it shows the utter failure of the government’s regulatory mechanism and puts the government in poor light.
Now that the PMO is well aware of this, what is the action? Not surprisingly, as a knee-jerk reaction and to show the might of the Modi government, the premises of several breeding companies were raided. One may also see some temporary arrests and/or fines imposed on these unscrupulous players. All this is fine, but, will it solve the issues confronting cotton farmers? Instead of showing the might of the government, it is time to think coolly and rationally in the interest of cotton farmers. And, it is here that the Modi government can learn a lesson from the Vajpayee government. What is this lesson?
The Vajpayee government was faced with a somewhat similar situation in 2001, when they came to know that some farmers in Gujarat had planted Bt cotton without government approval. The natural bureaucratic reaction was to confiscate and burn the cotton crop of these farmers. But, the political maturity of Vajpayee averted that bureaucratic jingoism. He sensed an opportunity for India to emerge as a leader in biotech. He not only approved Bt cotton on March 26, 2002, the first GMO crop in the country, despite opposition from several quarters, but gave the nation a new slogan, “Jai Jawan, Jai Kissan, Jai Vigyan”, extending the original slogan of Lal Bahadur Shastri to incorporate salutation to science. He was very clear that Indian agriculture should be based on science, and that India should lead in biotechnologies to fight hunger and malnutrition.
What have been the results of that bold decision? India officially released its first Bt cotton (Bollgard-I) in 2002, patented by MMBL and multiplied by several Indian companies under their private pact of license fees, etc. This ensured the protection of the intellectual property rights (IPR) of MMBL. In 2006, MMBL introduced Bollgard-II with additional traits. As a result of this bold and wise decision, India, today, has emerged as the largest producer of cotton and the second largest exporter in the world. The attached figure shows that, as against the business-as-usual scenario, India gained from extra exports of raw cotton, yarn, and also from import savings, to the tune of $67 billion, cumulatively, during the period 2003-04 to 2016-17. The farmers gained in terms of extra income and the nation gained in additional foreign exchange earned. And, today, more than 95% of the cotton area is under Bt cotton. All a result of the political maturity, wisdom and boldness of Atal Bihari Vajpayee to take a call on Bt cotton. Alas, since then, neither the UPA, nor the Modi government, has had the courage and wisdom to approve other GMO crops, such as Bt brinjal and mustard, despite the scientific body (GEAC) having given the green signal after due safety checks. This is sheer timidity killing India’s chance to be a global leader in GM technology!
We all know that it is investment and continuous innovations that can ensure India emerging as a global leader in biotechnology. Bollgard-I (BG-I) was the first Bt variety launched by MMBL with a single gene, cry1Ac, that fought against American bollworm (Heliothis Armigera) infestations. The last official approvals for BG-II, with double genes, cry1Ac and cry2Ab, for enhanced protection came in 2006. But, now after 12 years of BG-II, these benefits seem to be fading away. The outbreak of pink bollworm in Maharashtra, last year, may be an indication of that. Alongside better farm practices for BG-II, it maybe time to have BG-III with additional pest resistant proteins (cry1Ac, cry2Ab and Vip3A), along with HT (Roundup Ready Flex (RRF)) traits. This will enhance pest resistance and save on labour costs for weed management with some Glyphosate spraying. Globally, Australia, Brazil and US have gone ahead with this, but India has lagged behind, and very soon, all the gains of the Vajpayee government may be frittered away, if the Modi government does not take the right decision that puts farmers and their right to access the best technologies in the world first. It would also require protecting the IPR of suppliers of genuine innovations. One needs innovators, and not pirates, for genuine products for the long haul. Can the Modi government fix this and give the green signal to not only BG-III, but also Bt brinjal and GM mustard? Only then can it fulfil the dream of Vajpayee wanting to make Indian agriculture science-based, and it will hopefully propel India towards global leadership in biotech.
The Federation of Indian Export Organisation, Southern region, today said the RBI’s repo rate hike was on expected lines given the inflation outlook while Knitwear exporters in Tirupur expressed concern that the increase in cost of credit would impact the sector.
The FIEO’s southern region Chairman A Sakthivel, however, pointed out the tight liquidity conditions faced by the export sector especially, by the MSME, and requested the RBI Governor to bring export credit under priority lending category immediately.
“The unfavourable condition in our major markets, tough competition from neighbouring countries coupled with higher interest cost and deficiency in dispensation of working capital requirement of the exporters strongly argue for the need for placing Export Finance under priority sector lending,” he said in a release.
Tirupur Exporters’ Association President Raja Shanmugham said the increase in cost of credit would make the export units “un-competitive” and would impact the knitwear garment exports.
In a statement, he said the sector was already struggling due to the price pressure in overseas market.
Real estate major House of Hiranandani said the rate hike was on “expected lines” and added it would impact the revival of the sector.
“Construction activity had started to pick up slowly but the rise will hurt consumer sentiment”, Chairman and Managing Director of the company Surendra Hiranandani said in a release.
The RBI today raised its interest rate by 25 basis points on inflationary concerns for the second time in two months.
