The textile ministry has recommended a reduction in the excise duty for man-made fibres to 6% from the current 12% and greater flexibility in labour laws, including doubling of the overtime limit for workers and easing restrictions for women to work at night in factories, to boost growth in the sector, textiles minister Santosh Kumar Gangwar said.
“Realising the turmoil our exporters are facing, we have recommended a number of corrective steps to various ministries concerned in consultations with industry stakeholders,” Gangwar told FE.
At present, man-made fibres like polyester attract a 12% excise duty, but cotton, the competing fibre, attracts none. This duty disparity has distorted the domestic consumption pattern in favour of cotton, contrary to the global trend, while stringent labour laws have pre-vented garment companies from consolidating their capacities under fewer roofs fearing “union militancy” and difficulties in operations.
The textile and garment sector is the largest job provider after agriculture, employing around 45 million people, and is proposed to be one of the most important sectors in the government’s Make in India programme.
The industry has long been complaining that the duty disparity is preventing domestic producers from scaling up operations and, consequently, hurting India’s export competitiveness in man-made textiles. This is because while man-made fibres account for around 70% of the world’s total fibre consumption, they make up for less than 30% of India’s demand.
Gangwar said his ministry has also suggested to the labour ministry to facilitate certain changes to labour laws. The suggestions include increasing the overtime limit for employees from 50 hours to 100 hours and allowing willing women to work at night, especially in garment factories. The textile ministry has also suggested that the overtime wage be raised to one and a half times the regular rate, in accordance with the International Labour Organisation convention, instead of double the normal rate.
The recommendations follow textile secretary SK Panda’s presentation to Prime Minister Narendra Modi earlier this year in which the department had listed eight short-term initiatives — including “rationalisation” of duties on man-made fibres, further simplification of labour laws and facilitating more working capital to mills — to be undertaken within a year under the Make in India programme. FE was the first to report on January 22 about Panda’s presentation to the PM.
“Stiff labour laws have led to apprehensions that the bigger you grow in size, the more difficult it is to run the businesses. Since garment is the most labour-intensive sector after agriculture, the impact is felt more in garments than in some other textile segments,” textile expert DK Nair added. Around 70% of the garment sector employees are women.
According to the latest data, overall textile and garment exports rose 0.6% to almost $18 billion in the first half of the current fiscal from a year before, while the country’s overall exports plunged by 17.6% during the period.
Consequently, the share of such textile and clothing exports in the country’s overall exports have risen to 13.5% in the April-September period this fiscal from 11.1% a year before. However, such exports are expected to miss the target of $47.5 billion for 2015-16 by a wide margin, industry executives said.