Special Rs 6K-cr package cleared by Union Cabinet to boost textile sector

The Union Cabinet on Wednesday cleared a Rs 6,000 crore special package for the textiles and apparel sector with an aim to deal with the rising competition from China’s textile and apparel industry. The move, according to the government, would create 10 million new jobs in the next three years, in addition attracting investments of $11 billion and generating $30 billion in exports. The decision was taken at a meeting of the Union Cabinet chaired by Prime Minister Narendra Modi.

The measures approved include additional incentives for duty drawback scheme for garments, flexibility in labour laws to increase productivity, as well as tax and production incentives for job creation in garment manufacturing.

Finance minister Arun Jaitley while briefing on Wednesday’s Cabinet decisions said that over the last few years, apparel manufacturing had shifted to countries such as China, which had cost advantages. However, China’s cost advantage has been neutralised to some extent because of increase in labour wages. They have advantages of economies of scale. Therefore, it was decided to take steps to boost the sector. The package will help in realizing the true potential of employment generation in the textile and apparel sector.

To bring in flexibility in labour laws, the Cabinet has cleared the proposal to increase overtime hours for workers which are not to exceed 8 hours per week in line with International Labour Organization norms. Fixed term employment has also been introduced considering the seasonal nature of the garment sector. A fixed term workman will be considered on par with permanent workman in terms of working hours, wages, allowances and other statutory dues, as per a government statement.

The Centre would bear the entire employer’s contribution of 12 per cent under the Employers Provident Fund Scheme for new employees of garment industry earning less than Rs 15,000 per month, for the first three years. This compares with the current provision of 8.33 per cent towards employer’s contribution, being provided under Pradhan Mantri Rozgar Protsahan Yojana.

Also for those earning less than Rs 15,000 per month, the employee provident fund will be made optional. This will leave more money in the hands of the workers and also promote employment in the formal sector.

The statement also said that the package breaks new ground in moving from input to outcome based incentives by increasing subsidy under Amended-Technology Upgradation Fund Scheme from 15 per cent to 25 per cent for the garment sector as a boost to employment generation. The subsidy under the scheme would only be disbursed, once the estimated number of jobs is created.

Following the Cabinet approval, textile stocks surged up to 19% on the BSE, led by Nagreeka Exports (up 18.86%). It was followed by Shekhawati Poly Yarn (up 17.60%) and Garden Silk Mills (up 9.96%).