New Delhi, India (BBN)– Indian government approved on Wednesday a Rs 6,000-crore special package for textiles and apparel sector to create one 10 million new jobs in 3 years, attracting investments of $11 billion and generating $30 billion in exports.
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.
“Over the last few years, apparel manufacturing ha d shifted to countries like China which had cost advantages. However, China’s cost advantage has been neutralised to some extent because of increase in labour wages. We have advantages of economies of scale. Therefore, it was decided to take steps to give a boost to the sector.
“The package will help in realising the true potential of employment generation in the textile and apparel sector,” finance minister Arun Jaitley told reporters.
The decision was taken at a meeting of the Union Cabinet chaired by Prime Minister Narendra Modi, the PTI reported.
“The Rs 6,000 package will result in additonal investments worth $11 billion, creation of one crore additional jobs and increase in exports worth $30.4 billion which will help boost textile and garmenting sector.
“We will overtake Vietnam and Bangladesh in garment exports within next three years if we properly implement the package,” textiles secretary Rashmi Verma told reporters.
The package would strengthen the Indian textile and apparel sector by improving its cost competitiveness in the global market, according to an official statement.
Compared with Bangladesh and Vietnam India was the leader in apparel exports between 1995 and 2000. Bangladesh’s apparel exports exceeded that of India in 2003, while Vietnam surpassed India in 2011, Textile Ministry data showed. With policy support, India can again regain its position in the next three years, it said.
Of the Rs.6,000 crore package, Rs.5,500 crore is for an additional five per cent duty drawback for garments. “In a first-of-its-kind move, a new scheme will be introduced to refund the state levies which were not refunded so far. Drawback at ‘all industries rate’ would be given for domestic duty paid inputs even when fabrics are imported under ‘Advance Authorization Scheme,’ according to the statement.
The remaining Rs.500 crore will be for additional incentives under Amended Technology Upgradation Funds Scheme (ATUFS), where the subsidy provided to garmenting units under the scheme is being increased from 15 per cent to 25 per cent, providing a boost to employment generation.
“The package breaks new ground in moving from input-based to outcome-based incentives; a unique feature of the scheme will be to disburse subsidy only after expected jobs have been created,” according to the ministry.
To ensure increased earnings for workers, the package specifies that overtime hours for workers shall not to exceed eight hours per week — in line with International Labour Organisation norms.
Taking note of the seasonal nature of the garment industry, fixed term employment will be introduced for the sector and a fixed term workman will be considered at par with permanent workman in terms of working hours, wages, allowances and other statutory dues.
Considering the industry’s seasonal nature, the provision of 240 days under Section 80JJAA of Income Tax Act (allowing deduction of 30 per cent of additional wages paid to new regular employees for three years where the worker has worked at least for 240 days in a previous year) would be relaxed to 150 days for the garment industry, the Ministry said.
Also, the government said it will bear the entire employer’s contribution of 12 per cent under the Employees’ Provident Fund Scheme, for new employees of garment industry earning less than Rs. 15,000 per month, for the first three years.