The industry is understandably disturbed by the freeze on TUFS sanctions announced by government. The circular issued by the Textile Commissioner to the Nodal Agencies advises the latter not to issue any further sanctions and also to freeze proposals in the pipeline, for now. Our enquiries show that the allocation for the 11th Five Year Plan Period (2007-12) for TUFS has already been used up in the first three years and additional allocation will be required for the rest of the Plan Period. A proposal for enhancing the allocation has already been moved by the Ministry of Textiles. The Scheme needs additional funds for meeting the commitments against existing sanctions for the rest of the Plan Period and also for further sanctions to be issued. Textile Ministry has already taken some meetings of various segments of the industry to see what modifications are possible in the Scheme to reduce its requirement of funds. CITI has given its recommendations and we are pursuing this matter actively with the Ministry to ensure that the Scheme continues to operate with minimum alterations. I hope sanctioning of fresh projects would resume soon.
The increase in cotton yarn prices during the last few months had raised a lot of heat and dust in the industry, with manufacturers of value added products demanding price stability for yarn. Spinners have been contending that yarn prices can stabilize only if prices of cotton and other inputs stabilize. However, some reduction in yarn prices was agreed upon during discussions between spinners and garmentors. But during recent weeks we have seen a disturbing trend of increasing cotton prices and declining yarn prices in the market. In fact, market prices of cotton yarn have declined below the levels that the spinning industry had agreed to. With government relaxing the restrictions on cotton exports, large quantities have been shipped out, pushing up domestic cotton prices. The new crop is two months away and spinners may have a difficult time during this period.
A draft of the proposed National Fibre Policy has been placed in the website of the Ministry of Textiles for comments from the industry and public. In CITI, we held a meeting of our Sub Committee on Fibres and have forwarded our views to the Ministry. The draft seeks to address the serious issue of availability of Indian cotton to the domestic industry, rather than to its competitors in the other Asian countries. It also seeks to bridge the gap between the shares of manmade fibres in consumption in India and in global markets. However, it was noticed by the Sub Committee that many of the provisions included in the draft are extraneous to the fibre policy and not covered by the recommendations of the Working Group appointed for recommending the Policy. In fact, the draft Policy seems to target the spinning sector even more than supporting the fibre sector. In a meeting convened by Secretary (Textiles) on 20th July 2010, representatives of CITI and the other industry bodies pointed out that the proposals to establish a Yarn Board, to introduce export duty on yarn, to tighten the provisions relating to hank yarn obligation etc are neither within the scope of Fibre Policy, nor desirable.
The economic recovery in the western countries seems to be slower than expected earlier. Since a major portion of our exports goes to these countries, this development does not augur well for our textile and clothing sector. In West Europe, the crisis in Greece and some of the other relatively small Member States seems to impact the recovery in the whole of EU more substantially than earlier expected. In the US, the recovery continues but is not picking up much pace. As of now, our exports of garments are showing marginal increase and non-apparel textiles are registering reasonable growth. But to what extent we can sustain the rebound in exports will depend significantly on the economic developments in West Europe and the US.
It is more or less clear that GST will get implemented from April 2011 and textile products will be part of it. So far we have been debating whether GST is good or bad for our sector. The focus on the issue has to change now to the process of implentation. We need to ensure that the GST rates applicable to this sector are kept to the minimum. Given its highly decentralized nature, many in our industry have a feeling that proper procedures should be there for preventing evasion. There is also apprehension that units may strive to remain outside the purview of GST by reducing the scale below the threshold level that would be stipulated. This can lead to further fragmentation of the industry. I hope that GST will address these issues. In CITI, we will continue to pursue these matters with the government in the coming months. |
