The textile ministry has sought R1,750 crore in supplementary grant from the finance ministry to settle claims of refunds under the new duty drawback scheme — announced as part of a special package for the garments industry in June — in the current fiscal, a senior government official said.
The ministry has so far received claims to the tune of R160 crore from garment exporters since the scheme was notified in late September, the official told FE.
In a first, the government announced in June its decision to refund state levies under the duty drawback scheme to boost the competitiveness of garment exporters. It was the most important decision in terms of financial ramification, which was estimated to cost the government a total of R5,500 crore over a three-year period.
This particular move was aimed at attracting investments worth $2.7 billion, boosting exports by $9.5 billion and creating 9.5 lakh jobs over the next three years.
This apart, the Narendra Modi government also declared some crucial labour reforms for the garment sector, including the introduction of fixed-term employment, and decided to bear the entire 12% of the employers’ contribution of the Employees’ Provident Fund Scheme for certain categories of employees, up from the current 8.33%.
Through this package entailing a total estimated cost of R6,000 crore, the government targets to create 10 million new jobs, $30 billion additional exports (over and above the textile and garment exports of $40 billion in 2015-16) and investments worth R74,000 crore over the next three years.
Elevated logistics costs, high tariff barriers for exports to key market like the EU when some other competitors like Bangladesh enjoy dutyfree access and archaic labour laws have caused Indian garments exports to grow at a much slower rate for years now.
Consequently, angladesh beat India in garment exports in 2003 and Vietnam in 2011. India’s garments exports were to the tune of $17 billion in 2014, trailing Bangladesh’s $29 billion and Vietnam’s $21 billion. India’s overall textiles and garment exports stood almost flat at $40 billion in 2015-16 from a year before.
Despite being the world’s second-largest producer of cotton in 2014, India accounted for just 5.8% and 3.7% of global textile and garment exports, respectively.