K. Dalmia, Chairman, Texprocil

India is the second largest exporter of textiles in the world. The industry – which contributes to 4% of India’s GDP – has seen considerable growth over the last four decades. The Dollar Business caught up with R. K. Dalmia, Chairman, TEXPROCIL, to understand the opportunities and challenges in the sector.

Interview by Aadhira Anandh M | January 2016 Issue | The Dollar Business

The Dollar Business (TDB): During 2014-15, the textile industry saw a rise in its marginal value by 5.4%. What do you attribute this performance to?

R. K. Dalmia (RKD): The performance can be attributed to lower input costs including fibre costs, timely export incentives, and diversification of exports to non-traditional markets.

TDB: What are the primary challenges that hinder the growth of the textile industry in India as a whole?

RKD: Availability of raw materials at international prices (especially MMF fibres), preferential duty access vis-à-vis other textile competing nations, and procedural delays in disbursal of export benefits are the main challenges.

TDB: What are the export promotion measures that TEXPROCIL takes to ensure the growth of the industry?

RKD: The Council is involved in a wide ambit of both external as well as internal export promotion activities. These include organising fairs, buyer seller meets and overseas trade delegations, giving information to overseas customers about Indian companies, market information, trends and forecasts, identification of potential new markets and seeding the export activity through delegations, and defending Indian exporters from non-tariff barriers, anti-subsidy investigations etc.

For Indian exporters, TEXPROCIL has made available opportunities to trade that exist across the globe. Our internal activities include working with the Indian government on export promotion policies, providing industry data on duties and taxes suffered with documentary evidence to arrange refund of the same after exports through a well thought draw back mechanism, assisting the government in bilateral negotiations, helping members understand the various procedures and policies of the government and helping members reach out to customers.

TDB: Are you happy with the export incentives that you get for the textile industry? What do you think needs to be changed?

RKD: The textile industry has received generous benefits under the Merchandise Exports from India Scheme (MEIS). We have also welcomed the new Drawback Rates recently announced by the Ministry of Finance. Except for a few issues relating to value caps and product coverage, the Drawback Rates are in line with the industry’s expectations.

Additionally, we have requested the government to re-activate the TUF Scheme and provide additional funds to clear all pending applications. The industry is keenly awaiting the notification on the TUF Scheme, which I believe is currently in the process of restructuring with suitable amendments.

The Interest Equalization Scheme which came into effect from 1st April, 2015, for a period of five years includes all categories of cotton fabrics and made-ups. I am sure this will give the much needed boost to exports of cotton fabrics and made-ups.

TDB: Are there snags in the government’s policies that affect the productivity of the industry? If so, what are they, and how do you plan to overcome the same?

RKD: Cotton yarn has been excluded from the Interest Equalization Scheme and it will also not be available to merchant exporters. The Council has already made representations to the Ministry of Textiles as well as the Ministry of Commerce to include cotton yarn and merchant exporters in the Interest Equalization Scheme. Another important area where government intervention is critical is the implementation of GST. In view of the frequent inter-state movement of raw-materials and finished goods, and the decentralised nature of the industry structure, it is imperative that the 1% levy on inter-state movement of goods is dropped, and the textile sector itself is included in the lowest tax bracket.

TDB: Do you think the existing duty structure and tax deductions available to the textile sector are enough to boost its fortunes?

RKD: Excise duty is optional for the cotton textile sector, whereas it is mandatory for MMF textiles. However, there is excise duty on other inputs like dyes, chemicals, packing materials, etc. At subsequent stages of production in the value chain, excise duty is optional. Since most of the textile units – both in cotton and synthetic sectors – have opted for the optional route, the mandatory excise duty on fibre and on other inputs like dyes, chemicals, packing materials etc. increases the overall cost of input due to accumulated CENVAT credit. This issue of unutilised accumulated CENVAT credit needs to be resolved to boost the industry’s fortunes.

TDB: What is the role of the cotton textiles export promotion council (TEXPROCIL) in supporting the exporters of India?

RKD: The Cotton Textiles Export Promotion Council, popularly known as TEXPROCIL is an autonomous, non-profit body dedicated to promotion of exports. Since its inception in 1954, it has been the international face of cotton textiles from India, facilitating exports worldwide.

The Council promotes exports of raw cotton, cotton and blended yarns (50% or more cotton), grey and processed cotton (doubled, gassed, mercerised, dyed, mélange) and blended (50% plus cotton) woven and knitted fabrics, grey and processed home textiles and technical textiles (protective, performance, medical and geo textiles).

TEXPROCIL’s membership base includes everyone, from very large vertically-integrated mills to small units in rural areas making specialty products. The Council provides export promotional services to over 3,500 members including composite mills, spinning units, weaving units, knitting units, process houses and merchant exporters; showcasing a dazzling array of cotton textile products across the value chain.

TEXPROCIL has successfully established the presence of the Indian textiles industry as a reliable source of cotton textiles in the international markets. The increased quantum of exports and the diversification of existing markets bear testimony to the success of TEXPROCIL!

TDB: How do you think the ‘Make in India’ initiative can help the domestic textile industry?

RKD: The ‘Make in India’ initiative can help the industry in terms of modernisation of facilities by attracting FDIs through setting up of joint ventures, transfer of technology and production of value-added items, especially in the technical textile sector. Investments are critical in this capital intensive industry.

TDB: How do you see the growth of the textile industry in the near future?

RKD: India enjoys a significant position in the world textile market because of its strength in providing quality products with reliability of supplies. To maintain its position, India has been continuously focusing on innovation, technological advancement, infrastructure development, and a conducive policy environment to meet ever-increasing global expectations. In the developed markets, India has been able to consolidate its share, whereas in the emerging markets, the shares are seen to be increasing consistently. There is definitely a growing optimism with regard to growth of the Indian textile industry.