A slew of incentives including fiscal sops, flexible labour laws and reforms in the employee provident fund scheme have been announced by the Centre for the textiles and garments sector with the objective of creating one crore jobs over the next three years and increase exports and investment flows.

The package, approved by the Union Cabinet on Wednesday, includes an increase in subsidy under the amended-TUFS (technology upgradation fund scheme) from 15 per cent to 25 per cent for the garment sector and enhanced duty drawback coverage for exporters that will include state levies that were not refunded before.

“This move (enhanced duty drawback) is expected to cost the exchequer ₹5,500 crore but will greatly boost the competitiveness of Indian exports in foreign markets,” an official release said.

“The steps will lead to a cumulative increase of $30 billion. In exports and investments of ₹74,000 crore over next 3 years,” it added.

The Centre has also decided to bear the entire employer’s contribution of 12 per cent under the EPF Scheme (up from 8.33 per cent being borne at present) for new employees of garment industry earning less than ₹15,000 per month, for the first three years. This will cost the exchequer an estimated ₹ 1,170 crore over the next three years.

EPF will also be made optional for employees earning less than ₹ 15,000 per month.

This shall leave more money in the hands of the workers and also promote employment in the formal sector, the release added.

Garment exporters say that the booster package will help the sector fight competition in the international market. “The cost differential that India suffers vis-à-vis our competing countries has been duly addressed. The industry is gearing up the $20 billion target set for this year,” said Ashok G Rajani, Chairman, Apparel Export Promotion Council.

Following a decline in exports for the last five months in a row, the sector is now gearing up for an increase, and the flexibility introduced in labour laws will do its bit in pushing shipments, he added.

Responding to long-pending demand from the industry on increasing overtime hours, the Centre has decided to raise the cap to 8 hours per week in line with International Labour Organisation (ILO) norms. This would nearly double the overtime hours from the current cap of 50 hours per quarter of a year.

Fulfilling another major demand of the industry, the government has introduced fixed term employment in the sector. “A fixed term workman will be considered at par with permanent workman in terms of working hours, wages, allowanced and other statutory dues,” the release said.

The Centre has also allowed relaxation for the garments sector to enhance scope of exemption under Section 80JJAA of the Income Tax Act. The Section provides that an Indian company engaged in manufacture of goods in a factory is allowed a deduction of 30 per cent of additional wages paid to the new regular workman for three years including the year of employment. “Looking at the seasonal nature of garment industry, the provision of 240 days under Section 80JJAA would be relaxed to 150 days for garment industry,” the release said.

The majority of new jobs are likely to go to women since the garment industry employs nearly 70 per cent women workforce.

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