Union Budget 2019-20 Offers Little To Textile Industry

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Budget at a glance:

  • ATUFS gets ` 700 crore allocation
  • Cotton Corporation of India gets 118% higher grant of ` 2017.57 crore for cotton procurement
  • Grant for Integrated Wool Development Programme has been increased to ` 29 crore
  • Lower corporate tax of 25% for over 99% of companies
  • Upgradation of 1,25,000 kms of rural road under PMGSY-III in five years with an outlay of more than 80,000 crore with all weather connectivity provided to over 97% of such habitations
  • Easing local sourcing norms to attract FDI for single brand retail sector
  • Encouraging digital payments
  • GST procedures being eased further
  • Legacy Dispute Settlement Scheme 2019 to help entrepreneurs clear service tax, excise duty
  • litigations of pre-GST days
  • Agro-rural economy development to focus on Bamboo, Honey and Khadi clusters
  • Housing for all will create demand for home textiles
  • Skill upgradation to focus on new age skills
  • Labour laws to be streamlined
  • Women entrepreneurship is being encouraged
  • Customs duty reduction on naptha, wool fibre, wool tops

Union budget 2019-20 does not have anything very specific for the textile and apparel industry, and is more a continuation of the government’s broader  vision of improving ease of doing business, infrastructure development, development of MSME sector, skills upgradation, women empowerment, social welfare, all aimed at making India a US$ 5 trillion economy in the next five years.

ATUFS allocation is down
One of the most important schemes for the textile industry is the ATUFS, for which the finance ministry allocated a sum of ` 700 crore. According to various industry associations, pending subsidies under the various TUF schemes amount to around ` 10,000 crore.  Out of ` 17,822 crore fund allocated for TUF subsidy for the period 2017-2022, only around ` 2,400 crore has been utilised. The industry has been demanding that the subsidies be released at the earliest.

During the recently concluded ITMA 2019 in Barcelona, visitorship from the Indian textile industry was amongst the highest, indicating a strong intent to invest in modernisation. Faster disposal of TUF subsidies will boost investments in the industry.

Surat industry demands unmet
The Surat textile industry’s demand of lower GST rates were not met either.  The GST Council and the government have been tweaking rates when needed. However, in this budget, the FM announced various measures to smoothen the process of GST further.

Easing sourcing norms for higher FDI
To further attract FDIs in the retail sector, the government has proposed easing the local sourcing norms for single brand retail sector. This will impact the Indian apparel manufacturers who supply to the foreign labels, and will probably create competition from cheaper imports from Bangladesh and China. The industry is already crying foul over the growing apparel imports from Bangladesh. India has the capacities and capabilities to supply to foreign labels.

Higher budgets for some schemes
The budget has increased allocation for some schemes. Highest grant is for procurement of cotton by Cotton Corporation of India (CCI) under Price Support Scheme which is 118% higher than last year and stands at ` 2,017.57 crore. It also has maximum share of 42% in overall grant for textiles.

Grant for Integrated Wool Development Programme has been increased to ` 29 crore. There are a number of other proposals in the current budget which will help the textile and apparel industry.

Lower corporate tax rate
The government is continuing with a phased reduction of corporate tax rates. The lower tax rate of 25% is now applicable to companies having an annual turnover of up to ` 400 crore, compared to the earlier limit of ` 250 crore. This would cover 99.3% of the companies.

Digital payments
Digital payments infuse more transparency. To move away from cash payments, FM announced several measures which include discouraging the practice of making business payments in cash, proposal to levy TDS of 2% on cash withdrawal exceeding ` 1 crore in a year from a bank account. Business establishments with annual turnover more than ` 50 crore will have to offer low cost digital modes of payment to their customers and no charges or Merchant Discount Rate is to be imposed on customers as well as merchants. RBI and banks will absorb these costs from the savings that will accrue to them on account of handling less cash as people move to these digital modes of payment.

Easing GST procedures
The Finance Minister announced that free accounting software for preparation of tax returns is being made available to small businesses and a fully automated GST refund module is expected to be implemented soon. She said taxpayer with an annual turnover of less than 5 crore is to file quarterly returns. Electronic invoice details are to be captured in a central system to enable pre-filled taxpayer returns and a simultaneous e-way bill to be generated. These are expected to begin from January, 2020 reducing the compliance burden significantly.

Legacy Dispute Resolution Scheme, 2019
More than ` 3.75 lakh crore is blocked in litigations in service tax and excise duties from pre-GST regime. The FM will notify a scheme – Sabka Vishwas Legacy Dispute Resolution Scheme, 2019 – which allows persons discharged under it not liable for prosecution.

Infrastructure development
Infrastructure development was the highlight of the budget. To take connectivity infrastructure to the next level, the government will build on the successful model in ensuring power connectivity – One Nation, One Grid – that has ensured power availability to states at affordable rates. The finance minister, Nirmala Sitharaman proposed to make available a blueprint this year for developing gas grids, water grids, i-ways, and regional airports.

She said that Pradhan Mantri Gram Sadak Yojana’s (PMGSY) target for completion was advanced from 2022 to 2019, as all weather connectivity has now been provided to over 97% of such habitations. This has been possible by maintaining a high pace of road construction of 130 to 135 km per day in the last 1,000 days. She underlined that the PMGSY-III is envisaged to upgrade 1,25,000 kms of road length over the next five years, with an estimated cost of ` 80,250 crore.

This will create demand for geotextiles. And hopefully stimulate production within the country. Better connectivity across the country will  also bring down infrastructure costs for all industries.

Agro-rural industry development
The `Scheme of Fund for Upgradation and Regeneration of Traditional Industries’ (SFURTI) aims to set up more Common Facility Centres (CFCs) to facilitate cluster based development to make the traditional industries more productive, profitable and capable for generating sustained employment opportunities. The focused sectors are Bamboo, Honey and Khadi clusters.

The SFURTI envisions setting up 100 new clusters during 2019-20 which should enable 50,000 artisans to join the economic value chain.

Further, to improve the technology of such industries, the Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship (ASPIRE) has been consolidated for setting up of Livelihood Business Incubators (LBIs) and Technology Business Incubators (TBIs).

The Scheme contemplates to set up 80 Livelihood Business Incubators (LBIs) and 20 Technology Business Incubators (TBIs) in 2019-20 to develop 75,000 skilled entrepreneurs in agro-rural industry sectors.

This will help India’s traditional organic fibre and fabric – khadi – to become more economically sustainable. And should encourage the textile and apparel industry to explore bamboo fibre applications.

Housing for all
Under Pradhan Mantri Awas Yojana – Urban (PMAY-Urban), over 81 lakh houses with an investment of about ` 4.83 lakh crore have been sanctioned of which construction has started in about 47 lakh houses. Over 26 lakh houses have been completed of which nearly 24 lakh houses have been delivered to the beneficiaries. There is large scale adoption of new technologies for construction of these houses. Over 13 lakh houses have so far been constructed using these new technologies.

Home furnishings are needed even in low cost housing. Demand for low-end, commodity furnishings- bedlinen & curtains mainly-will rise.

Skill Upgradation
The government will enable about 10 million youth to take up industry-relevant skill training through the Pradhan Mantri Kaushal Vikas Yojana (PMKVY).

This will help to create a large pool of skilled manpower with speed and high standards. The focus will be on new-age skills like Artificial Intelligence (AI), Internet of Things, Big Data, 3D Printing, Virtual Reality and Robotics, which are valued highly both within and outside the country, and offer much higher remuneration.

Labour laws
The FM has proposed to streamline multiple labour laws into a set of four labour codes. This will ensure that process of registration and filing of returns will get standardized and streamlined.

Women entrepreneurs
To further encourage women enterprise, the FM proposes to expand the Women SHG interest subvention programme to all districts. For every verified women SHG member having a Jan Dhan Bank Account, an overdraft of ` 5,000 will be allowed. One woman in every SHG will also be made eligible for a loan up to ` 1 lakh under the MUDRA Scheme.

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