Cabinet approves package for textile and apparel sector in India

Date: June 3, 2016

Cabinet approves package for textile and apparel sector in India

Textile and apparel sector in India

Courtesy: Ministry of Textiles

A special package for employment generation and promotion of exports in textile and apparel sector has been approved by the Union Cabinet.

The move comes in the backdrop of the package of reforms announced by the government for generation of one crore jobs in the textile and apparel industry over next 3 years. The package includes a slew of measures which are labor friendly and would promote employment generation, economies of scale and boost exports, aligned with the “Make in India initiative back in 2014 to make this country an manufacturing hub. The steps will lead to a cumulative increase of $30 billion in exports and investment of Rs 74,000 core over next 3 years.

The majority of new jobs are likely to go to women since the garment industry employs nearly 70 per cent women workforce. Thus, the package would help in social transformation through women empowerment, an official statement said.

Salient features of the package announced can be broadly divided into Employee Provident Fund Scheme reforms, increasing overtime caps, introduction of fixed term employment, additional incentives under ATUFS, Enhanced duty drawback coverage, and Enhancing scope of Section 80JJAA of Income Tax Act.

Under Employee Provident Fund Scheme reforms, the Government of India shall bear the entire 12 per cent of the employers' contribution of the Employers Provident Fund Scheme for new employees of garment industry for first 3 years who are earning less than Rs 15,000 per month.

At present, 8.33 per cent of employer's contribution is already being provided by government under Pradhan Mantri Rozgar Protsahan Yojana (PMRPY). Ministry of Textiles shall provide additional 3.67 per cent of the employer's contribution amounting to Rs 1,170 crore over next 3 years.

EPF shall be made optional for employees earning less than Rs 15,000 per month. This shall leave more money in the hands of the workers and also promote employment in the formal sector.

Under overtime work caps, overtime hours for workers not to exceed 8 hours per week in line with ILO norms. This shall lead to increased earnings for the workers.

Looking to the seasonal nature of the industry, fixed term employment shall be introduced for the garment sector. A fixed term workman will be considered at par with permanent workman in terms of working hours, wages, allowanced and other statutory dues.

The package breaks new ground in moving from input to outcome based incentives by increasing subsidy under Amended-TUFS from 15 per cent to 25 per cent for the garment sector as a boost to employment generation. A unique feature of the scheme will be to disburse the subsidy only after the expected jobs are created.

For enhanced duty drawback coverage, a new scheme, in a first of its kind move, will be introduced to refund the state levies which were not refunded so far. This move is expected to cost the exchequer Rs 5500 core but will greatly boost the competitiveness of Indian exports in foreign markets. Drawback at All Industries Rate to be given for domestic duty paid inputs even when fabrics are imported under Advance Authorization Scheme.

Lastly, looking at the seasonal nature of garment industry, the provision of 240 days under Section 80JJAA of Income Tax Act would be relaxed to 150 days for garment industry.


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