The Hindu Business Line : `Garment industry must focus on value creation'<br>Labour laws, multiple taxes dent ability to compete: New AEPC chief

Industry & Economy - Readymade Garments

`Garment industry must focus on value creation'
Labour laws, multiple taxes dent ability to compete: New AEPC chief

G. Srinivasan

Tailors at work at a garment unit in Tirupur. - M. Balaji

New Delhi , Feb. 12

WITH the Indian garment industry's demonstrative strengths in value addition, the time has come to focus on value creation, particularly design and innovation which need to be nurtured, the new Chairman of the Apparel Export Promotion Council (AEPC), Mr Vijay Agarwal, has said.

In an interview to Business Line here after assuming office, Mr Agarwal said that as value addition is very competitive and no longer lucrative, the industry should go in for value creation "as we are much better than China because of our design and innovative strengths complemented by better entrepreneurial skill".

Stating that India's apparel export remained negligible when compared with China, Mr Agarwal said India's share in the global trade in garments was hardly 3.6 per cent or $5.6 billion. As it was likely that by 2010 global trade in textile and clothing will be $500 billion, he said in order to even retain our share of 3.6 per cent, "our exports will have to go up between $15 to $16 billion".

Manpower needs

For this, the industry needs to employ 11 million semi-skilled and one million skilled people, he said adding that because of impediments of labour laws and multiple taxes that are not being reimbursed to exporters in full, the ability to compete with China has been dented.

Moreover, he said, in 2002, the dollar rate was Rs 49 and today it is Rs 44 — an appreciation of 10 per cent, rendering our competitiveness down by 10 per cent purely on exchange rate changes. In China, the yuan remains at the same level albeit a modest adjustment against dollar. Again, power cost in China is $0.03 per kilowatt against $0.08 here. Even government figures state that our production cost was higher by 8 to 10 per cent. With all these constraints, the industry was still growing, but the pace of growth would remain much less, he said.

Government support

Mr Agarwal said that was why the industry had asked the Government to treat every garmenting unit on par with SEZ units or 100 per cent export-oriented units as far as taxation goes. Secondly, because of high cost of production and a stronger rupee, "some sort of compensation should be provided to the industry" to ensure a level playing field with competing countries abroad.

Third, he said, "The antique labour laws of the country should be amended and brought to the needs of the industry at the current level". Also, the Technology Upgradation Fund Scheme (TUFS) loans, which expire next year, should be extended up to 2010. In this regard, he voiced concern over reports that the forthcoming budget might axe this scheme, which played a key role in the modernisation of the textile industry.

The AEPC chief said just like the processing house which has been given a special 10 per cent subsidy along with interest subsidy under TUFS, the garment industry should also be granted the twin benefit. Considering the fact that in China as soon as the industry submits document and export proceeds come, it is given 13 or 14 per cent reimbursement on the spot, reimbursement of drawback or DEPB credit should be promptly paid.

AEPC revamp

Asked about his immediate priority, Mr Agarwal said that he intends on restructure the whole administration of the AEPC so that it becomes exporter-friendly, instead of a mere quota distribution agency.Second, for the robust growth of the industry, he said, the focus would be on opening more apparel training and design centres (ATDCs) and tying up with foreign training institutes for imparting training across the value chain. "I took a trade delegation to Hong Kong in this regard recently and intend to take a couple of more delegations in the future," he said.

He said the third priority is to bring foreign direct investment (FDI) into the sector as the industry needs Rs 70,000-80,000 crore to reach $25 billion exports by 2010. Unlike the IT industry providing white collar jobs, the garment industry provides blue collar jobs and as the UPA Government's focus is to ensure higher employment generation, the textile industry meets the twin needs of the authorities and the people if it is treated as a "focus" industry, Mr Agarwal added.