Tax sops will help boost Indian garments exports: Textiles Secretary Rashmi Verma

Swati Khandelwal Jain | Updated on January 17, 2018

Textiles Secretary Rashmi Verma

The ₹6,000-cr package is aimed at generating employment and boosting the production of garments, says Textiles Secretary

In a bid to overhaul the garment sector, the Centre cleared a whopping ₹6,000-crore package for the industry. But rigid labour laws and States’ power woes continue to cast a shadow on the prospects of the sector.

In an exclusive conversation with Bloomberg TV India, Textiles Secretary Rashmi Verma says streamlining the tax system for the sector will help make Indian textiles competitive on the global stage. Excerpts:

In a larger context, how do you think the new policy will push the textile sector to new heights given that the sector has been passing through a difficult phase for many years now?

First of all, this is not a textile policy. It is only a subset, a glimpse into the textile policy that will be announced soon. This is a special package that has been announced for the garments sector. The package is to the tune of ₹6,000 crore and the whole package will encourage employment generation in the garments sector.

As you know, India has some strength in the textile sector. We have the entire value chain from fibre to garmenting but it is tapering. The garment production is about one-fourth of the fibre production in the country. To balance the value chain and create jobs down the line and add value at every stage, we have introduced this package with the hope that we can eradicate the handicap that we have in our markets — Europe and the US — in terms of the high duty structure for exports as compared with our competitors like Bangladesh, Cambodia and Vietnam, so that we will be able to compete with these countries in the international markets.

What about the constraints on local taxes that are impacting textile makers? How do you plan to address those issues?

One of the reasons we cannot compete in the international market is that we have a plethora of taxes at the State as well as the Central level. As far as exporters are concerned, we were giving them duty drawback to cover the Central levy, but the State taxes were not being covered. Through the special package, we have covered that. We have set aside an amount of ₹5,500 crore for duty drawback to cover the State taxes. We have taxes such as VAT, Central Sales Tax and electricity duty, which will now be covered under the duty drawback so that our products will be very competitive in the international market.

Labour laws are another part in the textile industry that impeded growth. How are you seeing the reforms impacting the sector?

Textiles is a labour-intensive industry and labour laws do impact the industry in a huge way. Some relaxation of labour laws is required for boosting the sector. The new package does offer some relaxation. For instance, the employers’ contribution to the EPFO will be given by the government for the first three years of setting up an unit. . The government has also allowed fixed-term employment in the garment sector given that it is seasonal. Many States have already allowed night shifts for women. That will also go a long way in helping the industry. Such liberalisation of labour laws will go a long way in boosting the industry, especially the garment sector.

What is your view on the Free Trade Agreements (FTAs)? What is the progress on that front? How do you think they are helping the Indian industry? Which are the key markets that you think will give you benefits?

The Commerce Ministry is in talks with the EU for signing FTA. Now, with Brexit, we also need to have a dialogue with directly with the UK to have a preferential trade agreement (PTA) with them. Some of the older FTAs are also being reviewed and terms are being re-negotiated so that they are favourable for the textile sector. I am sure it will give a big boost to our exports.

Published on July 03, 2016

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