Free trade agreements with the European Union and the UK will be “big-ticket” deals for the textile sector, with the potential to level the playing field for Indian industry against competitors such as Bangladesh, Sri Lanka and Vietnam, textiles. Secretary UP Singh said in an interview.
Bangladesh, Sri Lanka and Vietnam enjoy duty-free access to the UK and EU, while Indian textiles attract an import duty of 9.5%. India is doing much better than other garment exporters in markets like the US where it is not at the disadvantage of duty.
On the inverted duty structure in textiles (where the duty on raw materials is higher than on finished products, thus affecting domestic manufacturing), Singh said reforms are needed, but the GST across the entire value chain should be reduced to 12% or 18 percent. Do not increase by %. A solution when cotton prices are at record highs. Edited excerpt:
We are doing several FTAs this year with a special focus on Textiles. Which markets can benefit us the most?
The EU and the UK are two big deals that we are looking forward to giving a boost to the domestic textile sector. The deal with the UK could be done in less than six months. Of the two, the EU will be the most beneficial to the domestic sector as it is one of the largest markets for textiles. India-UK FTA talks are underway and even if an early harvest agreement is signed, textiles will be part of it.
Sri Lanka is a major textile exporter but the economic crisis has hit production. Are we seeing new opportunities and will the benefits be permanent?
China is emptying many markets. The China Plus One strategy of the West is working in favor of India. The West doesn’t want to put all its eggs in one basket. Another factor in our favor is the situation in Sri Lanka. The exporters from Tiruppur are getting some orders which were earlier with Sri Lanka. However, making those customers permanent won’t be easy. The world is looking towards sustainability, be it compliance with labor laws, compliance with the environment or pollution. We have a problem in the powerloom sector and there is a problem of shortage of containers.
Inverted duty structure has been an issue in the textile sector for a long time. what a drag?
The inverted duty framework should definitely be removed. But taxing the entire value chain at 12% or 18% is not a solution. Rates should be reasonable as cotton prices are already very high and this is affecting the domestic market. But yes, the decision will be taken by the GST Council, not us.
Can PLI (Production Linked Incentive) schemes solve the problems of the textile industry?
I wouldn’t say that PLI will take care of all purposes. The government has taken 3-4 steps to make up for the loss we are in. Through PLI, we are trying to increase our presence in man-made fibers and technical textiles. The government launched the National Technical Textile Mission, PM-Mitra Textile Park, which will bring scale to the sectors. Through state and central taxes and levies and exemption of duties and taxes on export products, we are striving to ensure that only goods are exported, not taxes.