With increasing competition from Bangladesh and Vietnam, textile and garment companies, which are labour-intensive, are looking at incentives such as additional allocation to upgrade technology and interest subvention (subsidy) in the forthcoming Union Budget. The Apparel Export Promotion Council has sought a number of interventions from the government which include more incentives, continuation of the duty-free import of speciality fabric up to 1 per cent of export value of garments, round-the-clock customs clearance, withdrawal of GST on air-freight and duty-free import of samples.
The export of garments and textiles, which contributes 13 per cent to the overall shipments, fell by 3 per cent in December 2017 to $2.99 billion although in the April-December 2017 period it recorded a growth of 2 per cent at $26.13 billion. While apparel exports have grown at a slow pace following severe competition, yarn exports also remained tight due to the fall in demand from China including India losing market share in the Chinese market.
Budgetary allocation for the Technology Upgradation Fund (TUF) Scheme was cut by 23 per cent to Rs 2,013 crore in 2017-18 as against Rs 2,610 crore in 2016-17, much lower than 2014-15 period. Subsidies under the TUF scheme are key drivers for investment in the textile sector. Hence, lowering the allocation constrains the pace of capacity addition.
Analysts say a higher allocation for TUF scheme for 2018-19 would prop up investments in the downstream segments, facilitate value addition and result in a higher contribution by the sector to the country's GDP/forex. Apparel exports can go up significantly if raw material and intermediaries that are currently being exported get processed further into apparels. This has the potential to double the cotton-based apparel exports and increase total textile exports from the country by 50 per cent in terms of value, analysts noted.