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There is an uneasy calm over the industry. Even as the Government remains silent on reinstating duty drawbacks and GST refunds continue to worry exporters, fresh challenge comes in the form of a complaint filed at the WTO by the US about India’ s export subsidy programmes. This comes at a time when the industry was finally coming to terms with the current situation and getting back to business.
At this point of time, many people are travelling to meet their buyers, some to attend international fairs. At few export houses, preparation for the next season has begun, while another few are looking at ways to be more competitive. The people, who were in a very negative mindset at the starting of this year, seem to have come to terms with the market situation and accepted that the Government will not bring back duty drawbacks, like it was earlier. Also, the supply chain has slowly settled down with the GST system and work flow has finally become smoother, though issues still emain.
The recent complaint to the WTO about India’ s export subsidy programmes like Merchandise Exports from India Scheme, Export Oriented Units Scheme, Export Promotion Capital Goods Scheme, etc. is a blow to India’ s already dwindling competitiveness.“ The withdrawal of export subsidies is only going to benefit countries like Bangladesh which is already showing consistent growth in their RMG exports. It is a drastic situation and we would like to request the Government to
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HKL Magu, Chairman, Apparel Export Promotion Council( AEPC)
intervene immediately to redress the situation and also allow the release of the refunds, as until refunds start flowing, things will not improve both on the production as well as export front,” says HKL Magu, Chairman, apparel Export Promotion Council( AEPC).
Significantly, for the period April 2017 to February 2018, there has been a drastic decline of 10.25 %, in the apparel exports. Already Apparel production is on a declining curve with industry registering decline of 10.4 % in the apparel production for the period April 2017 to January 2018. On the other hand, for the period July 2017 to February 2018, apparel exports from Bangladesh have registered an 8.68 % improvement over the last year.“ Given the kind of uncertainty which has been prevailing due to US challenging India’ s export subsidy programme at WTO, we are seriously worried about the future of the industry. Exports are on a continuous decline since October 2017,” adds Magu.
The reason for worry is a consistent decline in production, month after month. As per the IIP figures, released by the Ministry
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of Statistics and Programme Implementation there has been a month to month decline in apparel productivity, From a positive growth 1.3 % in April 2017, while May saw a fall of 5 %. In June the decline was 3.2 % while in July, it was 5.1 %. August, September, October, November and December recorded 6.4 %, 7.2 %, 11 %, 13.1 % and 13.5 % dip, respectively.
It is no secret that the industry is suffering as most of their funds are blocked and they are unable to pay suppliers on time. Suppliers don’ t give advance, since they can’ t carry them forward for an indefinite period. This has resulted in the decline in apparel production.“ The biggest deterrent to the industry’ s sentiments has been the severe capital blockage due to the dual constraint of delays in RoSL disbursements and IGST refunds. Until the refunds start flowing, things will not improve. The dip in production will not allow us to meet our export target of US $ 20 billion,” laments Magu.
Taking a proactive approach, the AEPC has made a request to the Ministry of Commerce and Industry to urgently release the total ITC Credit and IGST of Rs. 4,097 crore which is blocked till date. AEPC has also informed the Ministry of Commerce that on account of new taxes there is a shortfall of around 5 % under GST and therefore several blocked and embedded taxes may be refunded through higher drawback and RoSL rates, along with refund of GST input tax credit( ITC). Further, AEPC has requested for a resolution of the issues of the industry, so that it can regain the lost opportunities in becoming a world leader in apparel exports.
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The relief package announced in 2016 helped the garments and made-ups sectors create around 2.5 lakh new jobs in the country. This was revealed by the Union Textile Commissioner Kavita Gupta.“ The Government now wants to note a double fold increase in annual revenue to US $ 300 billion by 2025,” she added. Notably, the readymade garment sector is the largest contributor to the country’ s overall textile exports and employs about 12 million persons now.
The Textile Commissioner said various benefits have been announced by the Union Government including giving employer’ s contribution to the employee provident fund( EPF) for new workers for those earning less than Rs. 15,000 per month during the first three years of employment. Government also made EPF for workers earning less than Rs. 15,000 monthly. The Government had also relaxed the provision of 240 days employment per year for workers under Section 80JJAA of the Income Tax Act to 150 days annually for the garment industry.
A new scheme was also introduced to refund the state levies which were not refunded earlier. The capital subsidy under amended TUFS( technology upgradation fund scheme) was increased to 25 % from 15 %. The Textile Commissioner said that the new textile industry policies announced over the years will help the industry increase its revenue. However, the tumbling exports from the country remains a serious concern for many stakeholders.
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