There appears to be a race among various states in the country for attracting new investments in various sectors including textile and clothing. Textile and clothing because these sectors are quite labour intensive and the country has a good track record of productive functioning of SMEs in these sectors. In this respect, the intensity with which the Gujarat Model of arranging Vibrant Gujarat type events can be seen in almost every state from Chhattisgarh to Karnataka. The number of MoUs and their total project cost are the main indicators of the success of these events. The first and foremost step being taken by states is to announce a new policy document for the industry.
Let’s examine the 2018-19 Union-Budget’s key points alongside the industry’s plight:
- The proposal to provide an outlay of Rs. 7148 crore for the textile sector in 2018-19. The industry feels that a large part of the increase in allocation will go to the state-owned Cotton Corporation of India (CCI) for ensuring the enhanced minimum support price (MSP) operations and hence, won’t be of much help to the industry.
- The proposal to increase the allocation for Remission of State Levies (ROSL) – scheme came into effect on Sept 20, 2016 – from Rs 1,855 crore in 2017-18 to Rs 2,163.85 crore. The industry leaders claim that the actual requirement of the RoSL funds for the apparel sector till March 31, 2018 is Rs 5,000 crore. On an average it is estimated to be about 3.5% of the FOB value of garments. The total RoSL amount allocated is not sufficient to cover the huge backlog even for the year 2017. Its high time the government realizes that the delay on its part to clear the long pending RoSL benefits, IGST refunds and other dues is causing businesses to suffer.
- The import duty on the pure silk has been increased from 10 per cent to 20 per cent to benefit the local pure silk industry people by protecting them from cheap imports from China. Silk apparel exporters are unhappy as they depend on cheap imports of raw material. Small silk producers happy with the support. Nothing can be done.
- The corporate tax on MSME (Micro, Small and Medium Enterprises) sector has been reduced from 30% to 25% for companies with a turnover of up to Rs 250 crore. Most units come under this turnover limit. A welcome step without any doubt.
- The Budget has a proposal to amend the Employee Provident Fund (EPF) scheme to reduce women employees’ contribution from 12% to 8% for the first three years of their employment. Just an illusion. Taking home more money is not getting more.
- The allocation for the Amended Technology Upgradation Fund Scheme (ATUFS) has been increased from Rs. 1956 crores to Rs. 2300 crores. The industry hopes this would mean that companies will get their arrears faster. Nothing more!
- The Budget proposes a reduction in the minimum employment period from 240 days to 150 days – for the new employees – necessary for the employers to claim the 30% deduction in Income Tax on emoluments paid to such eligible new employees. This IT deduction will also be allowed even for those new employees who are employed for less than the minimum period during the first year but continue to remain employed for the minimum period in the subsequent year. Clearly, a very good step for motivating employers to hire more, grow more.
It takes approximately ca. 8000 L of fresh water to grow 1 kg of cotton fibers; for the production of 1 kg of viscose or Tencel fibers, only ca. 450 L and ca. 300 L, respectively, are needed. Hence, there is a huge environmental price to be paid for the production of cotton and man-made cellulose fibers. Researchers worldwide are directing their efforts to develop environmentally friendly ways to produce newer fibres that do not use any toxic chemicals, generate waste, and requires less energy. Scientists and designers in close cooperation have developed a biologically derived filament that can be knit, whether by hand or machine, to create a new breed of textile composed of sodium alginate, a polysaccharide found in the cell walls of brown algae. It’s frequently used in the medical industry for wound dressing.
Despite several disrupting experiments by PM Modi like Notebandi and GST, India has managed to achieve a GDP growth rate of more than 7% – a figure which is under scrutiny by several leading economists & financial experts. The government claims several revolutionary achievements such as containing black money, make in India, ease of doing business, skill development programs, providing resources to youth to make them job creators instead of job seekers, faster infra development and so on. The future is being projected as rosy but it is no secret that there is a growing lack of confidence among a large section of general public – and also among the biz community – due to the growing unemployment, pathetic condition of our farmers, biz community’s overall hidden anger and also fast changing social & cultural changes being brought ignoring their long-term negative impact on country’s biz environment.
“Sustainable Textile Innovation” has perhaps become the most talked of phrase in the textile and clothing industry. Most conferences being held these days have managed to prominently display their focus on the urgent need for saving the planet earth. Special sessions are devoted championing sustainable textiles and lecturing the industry leaders and professionals to concentrate on making the sustainability as a mainstream—rather than sideline-effort if they want the business to be good and attractive i.e. appealing enough for the end consumers. Thanks to the multi-million dollar campaigns of all sorts, more and more consumers (especially those who are more sensitive and emotional) have started taking this quite seriously without going deep into the merits of their buying behavior and/or decision.
With regard to the export of cotton, the country faces a very strange and tricky situation every year making the government’s decision irrelevant and unacceptable to the stakeholders – cotton producers, ginners, cotton traders and the consuming industries like spinning mills, yarn traders, power looms, composite mills and of course exporters and importers of these materials including raw cotton. The government and others involved in policy making get sandwiched between two groups whose vested interests are diagonally opposite irrespective of the fact whether the export is allowed or banned. I feel that this makes a very interesting as well as important case study for our premier institutes of management. Their in-depth study of various aspects of this complex situation can help the government to strike a balance between various stake holders and ensure that the farmers get their fair and assured returns and unscrupulous hoarders get punished. The consuming mills should also not blow up their price concerns just to make more profits or cover up their inefficiency. The middlemen also need to be monitored so that they are not able to exploit the farmers who lack business acumen to deal with the buyers of their produce.
Post GST, one major announcement made by the government has been the launch of the Ahmedabad-Mumbai Bullet Train project. The GST and the Bullet Train both have generated immense public interest or public debate. This is so because of the many similarities they share especially in the complexity of their implementation. Both these ambitious projects require massive infrastructure, although of different kind. There is also a very huge amount of public money involved in both of these decisions.
Let’s assume the GST to be a Bullet Train. Then it is very clear that the government has already built this train and also built all the required tracks on which this train has to run. Infosys was awarded a Rs 1,380 crore contract to build GST Network (GSTN) system in Sept. 2015 that involved building and maintaining the technology network crucial for implementing the GST across the country for five years. By and large, the travel path of this train (i.e. starting point and the end point) has also been put in place. All the taxpayers, who qualify to be registered under the GST system, have to be the passengers of this bullet train. It is compulsory for them to catch this bullet train and travel the applicable distance without fail or face penal action for missing any ride. Continue reading Goods and Services Tax (GST) Vs. Bullet Train (Shinkansen)
“Industry 4.0” is the new buzzword becoming very fashionable, and hence, considerably over used. Industry 4.0 – also termed as the 4th generation of the industrial revolution – essentially represents the digital transformation of traditional industries like manufacturing to intelligent factories with the advancements in automation, advanced materials, 3D printing, artificial intelligence, augmented reality, cobots (collaborative and robots). Adaptive and ergonomic production lines, intelligent robots and integrated energy systems – all parts of Industrial Internet of Things (IIoT) – are increasingly making it possible for companies to digitize their manufacturing operations. This digital transformation is enabling them to become 24×7 connected intelligent factories. In a nutshell, Industry 4.0 converts your facility into a smart factory by providing it a working brain to impart more advanced built-in intelligence for the factory equipment and products enabling them to work together. Hence, the product will be able to tell the machine – at components level – what to do. The factory equipment runs on very sophisticated software which helps machines self-regulate and make more autonomous and intelligent decisions. The key features of a “Smart’ or “Digital” factory are: self-optimization, self-configuration, self-diagnosis, cognitive and machine learning to significantly increase the efficiency and output while reducing the waste and unnecessary tasks with minimum human intervention. However, the Industry 4.0 may lead to huge displacement of workforce as tiny intelligent robots can replace them for doing the same job more accurately, rapidly and economically.
“Same Side of Two Coins”
Which Coin Do You Have?
GST – Goods and Services Tax – which will be a single destination based consumption tax – is all set to replace existing taxes, including CENVAT, Octroi, Sales Tax, and Excise Duty, etc. from July 1, 2017. According to the Empowered Committee of State Finance Ministers, constituted by the Government of India: “GST is a tax on goods and services with comprehensive and continuous chain of set-off benefits from the producer’s point and service provider’s point up to the retailer’s level. It is essentially a tax only on value addition at each stage, and a supplier at each stage is permitted to set-off, through a tax credit mechanism, the GST paid on the purchase of goods and services as available for set-off on the GST to be paid on the supply of goods and services. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.” Continue reading “The Ghost Of GST will be Set Free On July 1. Are You Ready?”