As the textile industry gears up for the Union Budget, several crucial recommendations have emerged to bolster the sector’s viability and cost competitiveness.
Addressing High Raw Material Costs
Indian raw material prices are significantly higher than global rates due to Quality Control Orders (QCOs) on man-made fibres (MMF) and yarn, creating non-tariff barriers. This restricts the availability of specialized yarns and fibres, inflating local prices.
- The government is urged to liberalize import policies and lower or eliminate customs duty on MMF fibres and essential chemicals.
- Specialized cotton varieties, often imported due to local unavailability, suffer from high import duties that disrupt the textile value chain. A review of these duties is essential to maintain competitiveness.
Expanding Incentive Schemes
The current Production-Linked Incentive (PLI) scheme, limited to synthetic fibres, should be extended to the entire textile industry to drive broader investments. Additionally, reinstating the Technology Upgradation Fund Scheme would support modernization by providing subsidies for new machinery.
Cotton Procurement and Price Stabilization
To address challenges in cotton procurement:
- Replace the MSP (Minimum Support Price) scheme with a Direct Benefit Transfer (DBT) program to ensure liquidity for farmers.
- Establish a Cotton Price Stabilization Fund to tackle price volatility and ensure raw material availability.
- Extend the credit limit period for cotton procurement from three to eight months and introduce an interest subvention scheme to ease market fluctuations.
Revisiting Section 43B(h) of the IT Act
The newly introduced Section 43B(h) of the Income Tax Act, 1961, mandates that payments not received within 45 days by MSME units be considered as taxable income for the paying company. While aimed at protecting MSMEs, this rule overlooks the textile sector’s extended credit cycles, disrupting production planning.
- The industry recommends deferring Section 43B(h) and reintroducing it in a phased manner, allowing stakeholders to adapt gradually.
Conclusion
The textile industry calls for urgent reforms and supportive policies in the upcoming budget to address critical challenges and drive sustainable growth. By focusing on raw material costs, expanding incentives, and ensuring policy alignment, the sector can unlock its full potential in domestic and global markets.
