‘Textile export policies must benefit entire value chain’

The recent notifications by the Directorate General of Foreign Trade on knit fabrics permit all knitted fabrics to get export promotion benefits, instead of just a few specific items.

The same should happen across the entire value chain, according to Manikam Ramaswami, Chairman, Texprocil (Textile Export Promotion Council) and Chairman & Managing Director of Loyal Textiles.

“For instance, a policy to encourage woven fabrics exports must encourage all fabrics that can be produced by the constraint ‘loom’ rather than just a few items like shirting made from a particular trouser material made out of a certain raw material,” said Ramaswami in an interview to Business Line.

Edited excerpts

Why has the textile industry not been doing well in the last few years, in spite of being globally competitive?

The textile industry has been sliced into several segments, each with its own promotion body and association. Each segment has been working to improve its competitiveness, sadly at the cost of another sector.

Cotton exporters managed to get incentives to export cotton; they even got the government-controlled Cotton Corporation of India, operating with tax payers’ money, to give them discounts of up to 15 per cent and used all these to put Indian cotton in the hands of our competitors in Bangladesh and China.

Certainly, an anti-national incentive. This act ruined Indian mills’ profitability for a whole cotton year.

Then, a few yarn exporters got themselves 8 per cent DEPB against the eligible 3 per cent.

Curiously, it was gazetted in Hindi and only a few mills, which had access to the Hindi gazette, got the benefits. After six months, it got gazetted in English and Indian yarn was available to Bangladesh and Chinese exporters 5 per cent cheaper.

The value-added exporting sectors were badly hit. The sectors hit back and got yarn and cotton exports banned, which caused over $4 billion loss to the textile mills and cotton trade.

Fortunately, the warring factions of the textile Industry are now coming together on a common platform to come out with a common policy advocacy and the Textile Ministry is encouraging this effort.

Are export promotion policies addressing the entire value chain?

Another area that is being addressed is getting the export promotion measures to benefit the entire manufacturing capacity as against a few products.

For instance, a policy to encourage woven fabrics exports must encourage all fabrics that can be produced by the constraint ‘loom’ rather than just a few items like shirting made from a particular trouser material made out of a certain raw material.

The recent DGFT notifications for knit fabrics permit all knitted fabrics to get the promotional benefit.

The same should happen across the entire value chain to quickly move to a logic-based promotion from product code-based promotion.

Also, home textiles (such as bedsheets and curtains) and garments are being given different treatment, although both are produced through the same process of ‘cut and sew’ with embellishments and attractively packed for the store shelf.

This kind of anomaly needs to be removed to encourage exports.

Exporters of manufactured products in general seem to be suffering, while cotton textile exports are growing...

The nation is suffering because manufactured raw materials such as plastic, aluminium, steel and copper, made by large corporates, are priced high in India.

A huge amount of protection is given to them even though they enjoy the use of duty-free inputs in the case of crude oil or near-free inputs of ore and coal.

They enjoy pricing power, given to them through import duties, anti-dumping duties, high freight, non-tariff barrier such as BIS certification and export incentives.

The idea of giving resources at near-free prices is to help the Indian users add value and get the manufactured raw materials at less than international prices.

But in reality, they are 25 per cent higher than international prices. Fortunately, cotton produced by the poor farmer is available at international prices to textile mills.

The value-added products are being exported and the growth in exports is also very encouraging despite power problems.

However, exports of textiles made out of synthetic material are not growing due to the protection enjoyed by the raw material producer.

If we ensure that manufactured raw materials are available at less than international prices by removing the protection, our manufacturing industry will do very well.

It will wipe out the trade deficit and create plenty of jobs as well.

What are the emerging opportunities for textile exporters? What are the challenges?

Free trade agreement with the EU, Australia and Canada will open a new chapter in India's textile exports by adding several billions of dollars to India’s exports.

Technical textiles is a huge growth opportunity, especially safety, anti-flame, anti-acid, high-visibility and nuclear protection garments.

The West never compromises on safety and therefore these garments are recession-proof.

In the past, these were sourced locally but with recession there is a desire to import to reduce costs. This presents a huge opportunity for India.

We need to activate the various positive policy pronouncements made to help kick-start the exports of safety garments from India, by setting up a fast track mechanism to issue input/output norms, and coming out with identification policies to start the flow of benefits to this sector.

COMMENT NOW