Union Budget 2019-20 Mixed bag for textile & apparel industry

The increase in the annual turnover threshold limit from Rs. 250 cr to Rs. 400 cr for Corporate Tax of 25 per cent will benefit several textile mills. The percentage of women workforce in the textile industry is less compared to the number in Vietnam or China. The Budget has given priority to women empowerment. The Budget focuses on developing the Indian economy to a $3 tr economy this year. It gives importance to infrastructure development and encourages Foreign Direct Investment. However, some of the demands of the textile industry have not been met. The pending amount for ROSL (Rebate of State Levies) scheme for Tiruppur alone is likely to be about Rs. 300 cr. There is no allocation for it in the budget. Though the proposals are not damaging, there are no incentives too.

Here we are covering the views of some of the leading industry association’s head on the Union Budget 2019-20

Sanjay K Jain, Chairman, Confederation of Indian Textile Industry

The Budget is expected to give major impetus to the textile and apparel consumption by increasing the purchasing power of middle class and farmers. It has focused on empowering rural India and the middle class of the economy. The new announcements have highlighted the commitments of the present government to improve the overall socio-economic condition of the country by touching upon the healthcare sector, infrastructure, ease of doing business, more beneficial schemes for low income strata of the society by enhancing their purchasing power, protecting them through pension scheme, minimum income through MNREGA, etc.

However, the outlay for the textile sector has reduced from revised estimate Rs. 6,943.26 cr to Rs. 5831.48 cr. For A-TUFS, the Budget allocation has been steeply decreased from Rs. 2,300 cr to Rs. 700 cr. Last year only about 30 per cent of the Budget could be used due to low disbursements, however, to clear the carried forward obligations, a much higher allocation will be needed. The Budget for RoSL has also been reduced significantly which is a cause of great worry to the industry as this could lead to working capital blockages and delay in RoSL receipts. Further the industry has been expecting upward revision in RoSL rates which would need more funds.

Rahul Mehta, President, The Clothing Manufacturers Association of India

The Budget 2019-20 announced by the Hon’ble Finance Minister, Nirmala Sitharaman is a mixed bag for the textile and apparel industry. The extension of lower rate of 25 per cent corporate tax with an annual turnover up to Rs. 400 cr is a welcome step. Currently, this rate is only applicable to companies having annual turnover up to Rs. 250 cr. Infusion of Rs. 70,000 cr capital into public sector banks will ease the current credit squeeze. Also, Rs. 350 cr allocated for 2 per cent interest subvention for all GST-registered MSMEs on fresh or incremental loans will give a big thrust to MSMEs. Considering that over 80 per cent of the domestic apparel industry is in the MSME sector, all these measures could provide a boost to the sector.

While details have not been announced, the relaxing of local sourcing norms for FDI in Single Brand Retail can be detrimental for the growth of the domestic apparel manufacturing industry. This move could work against the Government’s drive towards Make in India. This will however encourage FDI in Retail.

HKL Magu, Chairman, Apparel Export Promotion Council

We congratulate Union Minister for Finance and Corporate Affairs Nirmala Sitharaman on her maiden Union Budget 2019-20. AEPC would like to thank Government of India for the reduction in corporate tax to 25 per cent for companies with annual turnover up to Rs. 400 cr and the proposed reduction in customs duty on wool fibres.

We also welcome the procedural simplifications proposed – like Interchangeability of PAN and Aadhaar, simplified single monthly return, fully automated GST refund module and the electronic invoice system. The industry hopes to witness a reduction in the compliance burden following these measures.

The industry today is faced with sever working capital shortage, due to long pending ROSL dues, difficulties in getting bank credits and GST refund blockages. We hope that the Rs. 70,000 cr proposed to be provided to PSBs will ease up the working capital credit flows. The industry is also waiting for the Rebate of State and Central Taxes and Levies (ROSCTL) scheme to be operationalized. We are hoping that the scheme gets enough funding for a smooth roll out and faster clearance of all past dues.

Ronak Rughani, Chairman, The Synthetic And Rayon Textiles Export Promotion Council

Through the Budget 2019-20, the government is focusing on making India a $3 tr economy this year and $5 tr economy in a couple of years. The Budget is also aimed at boosting infrastructure and foreign investment.

A futuristic Budget, it is encouraging for the manufacturing sector. A prime focus of Budget 2019-20 is easing of the operational procedures for the MSME segment. The various announcements and deliverables such as pension benefits, enrollment simplification, additional Interest Subvention benefits, ready-to-use payment platform, etc. are the hand holding support measures, which will substantially encourage and uplift the Indian man-made fibre (MMF) textile segment also, as most of the manufacturing units of this segment are MSMEs. The investor-friendly initiatives would likely promote more investment in the MMF segment of the country. Steps initiated towards boosting infrastructure will suitably address the existing infrastructural gap for export and structural issues. The Budget has also taken steps for encouraging Make in India initiatives by protecting domestic manufacturing units. Moreover, timely rationalisation and simplification of the GST issues will help the entire textile industry.

Prabhu Dhamodharan Convenor, Indian Texpreneurs Federation

We welcome the Budget announcement regarding formation of a committee with government and private stakeholders to suggest action to move forward on women development. Increasing the participation of women in workforce is one of the top most priorities of our country. The textile and apparel industry, which has around 40 per cent women workforce, can be part of this mission and contribute more towards women development. ITF will be keen to work on this mission.

We also welcome the allocation of Rs. 350 cr for 2019- 20 towards 2 per cent interest subvention scheme to benefit around 20 per cent of MSMEs registered under GST.

Raja M Shanmugham President, Tiruppur Exporters’ Association

It is a people-oriented budget. The announcement of Rs. 6,000 per annum to the small and marginal farmers is welcome, so as the increase in the Income Tax exemption limit from Rs. 2.5 lakh to Rs. 5 lakh to the individuals, and monthly pension to unorganised sector workers. The increase in Interest Equalization scheme allocation from Rs. 2,600 cr to Rs. 3,000 cr would meet the recent increase in Interest Equalization for MSMEs from 3 per cent to 5 per cent. The total allocation to the textile industry is inadequate, and it may be revised upwards in the regular Union Budget 2019-20.

KV Srinivasan, Chairman Cotton Textiles Export Promotion Council

The Budget has emphasised on the development of inland waterways for cargo movement. It will bring down the cost of transport, especially for bulk products such as raw cotton. The Non-Banking Finance Companies had been assured of support which was a right step. Exporters accessed alternative sources of finance at a lower cost.