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The Union Budget 2022-23 may not have specific benefits for textile producers but there are several general measures, including incentives for the MSMEs, that are beneficial for the sector, said Textiles Secretary Upendra Prasad Singh. In an interview with BusinessLine, Singh spoke about the provisions in details. Excerpts:
Why is the budget estimate (BE) for 2022-23 for textiles almost four times the BE of the previous fiscal but only about 8 per cent higher than the revised estimates?
The BE for 2022-23, at ₹12,228 crore, seems dramatically high when compared to the 2021-22 BE at ₹3,631 crore. But it is comparable to the 2021-22 RE of ₹11,449 crore. The difference is to provide for the losses suffered by the Cotton Corporation of India (CCI) in their MSP purchase over the last two cotton years.
The last two cotton seasons were badly affected by the pandemic with several spinning mills and weaving units shutting down and garmenting units, too, closed during the lockdown. But farmers kept growing cotton. As traders and millers were not buying at that time, the CCI had to step in and make large scale purchases. It bought cotton worth ₹55,000 crore at MSP over the last two seasons but sold it at a much lower price due to low demand suffering losses. So, an additional sum of ₹8,000 crore was provided in the 2021-22 RE and ₹9,000 crore in 2022-23 BE to provide for the CCI losses.
The Budget has allowed duty free imports of some items used by exporters. To what extent will it help the textile industry?
Exemptions on items such as embellishment, trimming, fasteners, buttons, zipper, lining material and packaging boxes will definitely help the textile sector. These items are mostly imported by exporters as buyers want their own labels. The exemption was removed last year, but following a demand from exporters the Budget has restored it.
Some handicraft exporters have noted that the exemptions no longer cover certain items such as electrical parts for fitting on lamps and Christmas lights. Can these be included?
We will have to examine that. We have to look at the finer details. We do have a list of items that are covered under the customs duty exemption. If there are some items that have been excluded, we have to see what these are. We will need to talk to the industry first.
Do you think the Union Budget will have any spin-off for the Production Linked Incentive scheme for textiles?
Actually it will. The extension of the concessional corporate tax rate of 15 per cent by one more year, till March 31, 2024, for newly incorporated manufacturing companies augurs well for the PLI scheme for textiles as the scheme also gives two years to investors to start production. Investors who qualify for the PLI scheme can start production by either 2022-23 or 2023-24.
Before extension of the time period for corporate tax concessions, only those investors under the PLI scheme would have got the benefit who would start manufacturing within a year. Now, investors can take their time and comfortably start production activities within two years and still get the benefit. The new date gels well with the PLI scheme.
Will it be correct to say that there may not be many direct measures to help the textile sector in this year’s Budget?
The Budget has a number of measures for the MSME sector. The textile sector is more than 90 per cent in the MSME category. If you look at the total MSME space, the biggest portion is taken by textiles. So, all benefits that have been announced for MSMEs will be applicable to textile units.
For instance, the Emergency Credit Line Guarantee Scheme (ECLGS) has been extended till March 2023 and it has an additional cover. This will definitely help the textile sector. Then there is the Credit Guarantee Trust for micro and small enterprises which has been revamped. Credit worth ₹2-lakh crore will be facilitated and the micro and small units in the textile sector can avail of it.
We are yet to know the details of the Raising and Accelerating MSME Performance (RAMP) programme (RAMP) scheme, that has been announced with an outlay of ₹6,000 crore over the next five years, but textile units stand to gain from that as well.
The Budget focusses a good deal on rationalisation of basic customs duty (BCD). How will the exercise affect the textiles sector?
This is a welcome move. There was a problem before as both ad valorem and specific customs duties were imposed on textile items. It has now been rationalised and there are only ad valorem rates.
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