Textiles package: Ministry still ironing out wrinkles

In apparel manufacturing, hiring and production increase is yet to happen under the new norms

Nearly three months after being approved by the Cabinet, the textile package announced by the government awaits implementation on the ground.

Announced in June, the special package involves a total outlay of Rs 6,000 crore aimed at improving competitiveness and generating jobs through a string of labour reforms. However, in apparel manufacturing, the specific sub-sector within textiles targeted by the package, hiring and production increase is yet to happen under the new norms.

Industry sources said the textile commissioner’s office was consulting stakeholders to iron out the difficulties in implementing the new norms. These include issues over wages, allowances and other statutory dues to be paid to workers. Also, the textile ministry has fixed overtime hours for workers not exceeding eight hours a week, in line with International Labour Organisation norms. Manufacturers claim all this needs time to be incorporated in their operations.

The package paved the way for fixed-term employment in apparel manufacturing looking at its seasonal nature. While manufacturers have welcomed the move saying it allows them to deal with excess demand and idle labour at different times of the year, workers have argued it affects their livelihood. The labour ministry notification formalising the rules for such employment was issued in early August after allowing a month’s time for public comments.

However, one of the major factors expected to boost hiring — increased government funding for provident funds of new employees — has also not started. The government currently bears 8.33 per cent of the employer’s contribution. The textile ministry will  provide an additional 3.67 per cent amounting to Rs 1,170 crore for first three years for every employee.

Ministry officials, under the condition of anonymity, said disbursements under the new norms were yet to be made, as companies had to submit their updated headcount of employees.

Also, the government would only pay for ‘new’ employees hired by firms provided they did not already have a employee’s unique identification number, Rahul Mehta, president, Clothing Manufacturers’ Association of India, said.

The manufacturing cycles in the garment sector are also out of sync with the new package. For apparel manufacturers, the festive season beginning August is the biggest draw for which manufacturing has ended by July.

On the other hand, hiring by apparel exporters would pick up by October-January, when exporters aimed to meet demand from the North American and European markets, said Chandrima Chatterjee, advisor to the Apparel Export Promotion Council. With demand in global markets remaining sluggish, that is also under question. Export of ready-made textile garments rose by 6.70 per cent in August.

Industry insiders, however, cheered a decision to extend incentives under the amended technology upgradation fund, from 15 per cent to 25 per cent.

The scheme, amended in December 2015, allows subsidy on capital investment to enterprises in the medium, micro and small sectors subject to a ceiling of Rs 30 crore over five years. The textile ministry officials said this would allow owners to employ more.

However, the subsidy will be disbursed only after the expected jobs are created. Any accruing benefits thus arising out of the textile package would be clear only by November-December, Binoy Job, secretary-general at the Confederation of Indian Textile Industries, said.

Benefits would reach manufacturers only by January, he added. The bulk of the planned capital outlay, an estimated Rs 5,500 crore is expected to be spent on an additional five per cent duty drawback given for garments. Duty drawback is refund of duties on imported inputs for export items. The government hopes it will lead to a cumulative increase of exports up to $30 billion.

“The industry is gearing up for the $20 billion target set for this year,” Ashok G Rajani, chairman of the Apparel Exports Promotion Council, said. With major global markets still recording negative growth and the Brexit uncertainty continuing, the package has been widely lauded by exporters.

Weaving hopes of revival

The story so far

• Cabinet approves textile package on June 22
   
• Labour ministry notifies draft rules for fixed term employment on August 4
   
• Textile commissioner consulting with stakeholders on implementation of new norms
   
• Manufacturers say issues over wages, allowances and other statutory dues payable to workers, fixed overtime hours under discussion with the govt
   
• Additional government funding for provident funds of new employees yet to start, as the companies have to submit their updated headcount of employees

Targets of the scheme

• 10 million jobs in three years
   
• $30 billion of incremental exports
   
• Rs 74,000 crore worth of investments

Fund flow

• Total capital outlay of  Rs 6,000 crore over three years
   
• Estimated Rs 500 crore for amended technology upgradation fund scheme
   
• Rs 5,500 crore for 5% additional duty drawback for garments