After a long time, the apparel industry felt that the Government has appreciated the importance of the apparel sector as a driver for employment generation, a major thrust for any party in power. As Virender Uppal, MD of one of the top export houses of the country and two times Chairman of AEPC puts it, “The year 2016 is special for the industry, as the ‘Special Package’ for Indian garment exporters is the first recognition by the Government of India, of the true potential of apparel trade and substantially increasing employment across the sector.”

Announced in June, the ‘Special Package’ of Rs. 6,000 crore (US $ 923 million), basically targeted at enhancing the competitiveness of the apparel exporters and envisaging job generation to the tune of one crore in three years, saw great support from the industry with 35 Indian apparel exporters immediately announcing investment plans of around Rs. 623 crore (US $ 96 million) over the next three years that will create employment opportunity for more than 30,000 people… Since then, things have not been as enthusiastic and the industry is very cautious in its approach.

Though the industry was very positive, the finer points were eagerly awaited and many claimed that they would move forward only after studying the provisions and its implication after the necessary implementation process was put in place. The Ministry on its part has been quick in notifying changes and pushing other ministries, notably the Ministry of Labour & Employment to do the needful, not much activity is being noticed from the side of the exporters and no big investments have been announced. The justifications given by many are two – where should we put up a new factory; and though we have become more competitive with this package, but not enough to meet or beat our competitors, namely, Bangladesh and Vietnam.

Some of the important provisions of the ‘Special Package’ and current status of implementation:

EPFO reforms: The Government will bear the entire employer’s contribution of 12 per cent, under the EPFS, for new employees in garment industry earning less than Rs. 15,000 per month, for the first three years. As an added benefit, EPF will be made optional for employees earning less than Rs. 15,000 per month, leaving more money in the hands of the workers and also promoting employment in the formal sector. – Guidelines formulated and circulated in August 2016…, a web portal inviting applications has been opened; 91 units have applied as of now.

Labour Law reforms: The overtime cap for workers in the apparel industry has been increased from 50 hours to 100 hours in a quarter. Also, considering the seasonal nature of the industry, fixed-term employment will be introduced for the garment sector workers. A fixed-term workman will be considered at par with permanent workman in terms of working hours, wages, allowances and other statutory dues. – Due diligence done for amendment in Factories Act 1948 for increasing overtime to 100 hours per quarter has already been done by MoT and notification for ‘fixed-term employment in apparel manufacturing sector’ released in October.

Enhancement of Capital Investment Subsidy under Amended-TUFS: The subsidy provided to garmenting units, under Amended-TUFS, has also been increased from 15 per cent to 25 per cent, thereby providing a boost to employment generation. – Provision rolled out in July; a total of 203 applications received for garmenting involving project cost of Rs. 276 crore.

Higher Duty Drawback rates: Rebate on state levies will be provided on garment exports for next 3 years and drawback on indigenous paid inputs will also be made available, even when fabrics are imported under Advance Authorization Scheme. This move is expected to cost the exchequer Rs. 5,500 crore but will greatly boost the competitiveness of Indian exports. – Scheme rolled out in September and approximately Rs. 160 crore worth of claims already lodged.

Relaxation of Section 80JJAA of Income Tax Act for additional tax breaks: Looking at the seasonal nature of the garment industry, the provision of 240 days under Section 80JJAA of Income Tax Act would be relaxed to 150 days for the sector. – Already notified and to take effect from 1st April 2017.

As the year comes to a close, the Cabinet in another attempt to support the value chain in textiles has extended the benefits of the ‘Special Package’ to the made-ups sector. It has been pointed out by the sector that the policy intervention would greatly help the made-ups segment to improve its global competitiveness in the global market and also create more demand for fabrics, yarns and fibres in the domestic market and thereby help the down sectors that have been suffering due to excess production capacity to a certain extent. The move is being appreciated as proactive on the part of the MoT, which has taken serious view of the representations made by The Cotton Textile Export Promotion Council along with a detailed study conducted by Earnest & Young justifying the need for including the made-ups segment to include under the special export package; the centre has included the made-ups segment under the special export package.

It will be interesting to see how the industry takes these incentives forward in 2017, but one thing is sure that the ‘Special Package’ is the biggest game changer for the finished goods segment of the textile value chain introduced in 2016 by the MoT and that too after a long time!

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