Draft National Fibre Policy RecommendsIncentivising Textile Exports and Agri. Extension Services


There was never an occasion when one did notfeel the absence of National Fibre Policy and the proposed draft, now placed inpublic domain, has not come too early. Its absence was being felt more keenlyin view of long term growth trajectory that our planners are now talking about.There has also been a growing concern on account of consumption of fibre in theratio of 59:41 between cotton and man-made fibres, as against 40:60 ratioworldwide.


The Objective


The Ministry of Textiles, Government of Indiahas, therefore, constituted a Working Group to formulate a National FibrePolicy with the objective of strengthening the fibre economy of the country andmaking Indian textile and garment sector competitive in the near, medium aswell long-term periods.


Methodology


The Working Group formed eight sub-groups; oneach for various fibres i.e. cotton, man-made fibres, jute, silk, wool, othernatural fibres, speciality fibres (also known as technical textiles) andspeciality (suvin and organic) cotton. Dun and Bradstreet was appointed as theKnowledge Partner to assist the Working Group as also the Sub-groups by way ofproviding information, forecasts and other inputs that formed the basis of therecommendations of the Sub-groups. The recommendations made by all Sub-groupsare directed towards the objective of formulating a fibre policy that is fibreneutral and would seek to enhance the production and availability of fibres in India to ensure sustained growth for the textile value chain..


Executive Summary


This section lists summary of the major policyrecommendations arrived by different Sub-groups for respective fibres. Whilethe comments on the individual recommendations of the Sub-groups will be madelater when these are discussed; there appears to be some haziness on both theobjective of National Fibre Policy as also as to what constitutes a NationalPolicy; in this case, on fibres.


Blurred Definition


It would be seen that the objective, as set outin Para 2 of the Introduction of the Policy, reads the objective ofstrengthening the fibre economy of the country and making Indian textile andgarment sector competitive in near, medium as well long-term periods, whilePara 5 of the same section speaks of recommendations made by all Sub-groupsare directed towards the objective of formulating a fibre policy that will befibre neutral and would seek to enhance the production and availability offibres in India to ensure sustained growth for the textile value chain.


It would be seen that while the objective setout in Para 2 of Introduction speaks of strengthening the fibre economy of thecountry, Para 5 refers to recommendations made by all Sub-groups are directedtowards formulating a fibre policy (i) that will be fibre neutral, and (ii)would seek to enhance the production and availability of fibres in India toensure sustained growth for the textile value chain. This conflict ofobjective, at the Introduction level, is too glaring to be ignored. After all,who expanded the mandate of the Fibre Policy to include and extend to textilevalue chain?


Second, can the National Fibre Policy bestretched to the point of textile value chain? I do not think so. Any fibrepolicy has to limit itself to adequate and timely availability of fibres atreasonable and world competitive rates. Anything beyond that should be asubject matter of any other domain and not fibre. To my mind, the differencebetween Strengthening the fibre economy and the recommendations made by theSub-groups are directed its expansion to include textile value chain isunjust and unfair, if not repugnant, to the National Fibre Policy.


Then, what has been placed in the public domainis what does not look like a National Fibre Policy, but juxta-positioning ofthe recommendations of each of the eight Sub-groups. There is no consolidatedview or recommendations of the Policy, leaving it to individual readers to findand fend for himself any recommendations that might have been tucked away insome recommendation of some Sub-group, but having a validity in all or morethan on sub-sector.

 

Comments on the recommendations of two important Sub-groups, relevant to the garmenting, i.e. cotton and man-made-fibre are set out hereunder:


Cotton


Para III confirms the fear that the draft Fibre Policy has chosen to stretch itself to estimation of investments worth Rs. 176,510 core needed during FY10 to FY20 for creating the required capacity along the textile value chain It must be borne in mind that a National Fibre Policy should legitimately deal, dwell and restrict itself to fibre matters-and not beyond that by stepping into National Value Chain Policy. The said Para lists investments required till 2020 for spinning, weaving, knitting, processing and garmenting, with a grand total of a precise figure of Rs. 176,510 crore.


Para IV recommends for formulation of National Fibre Policy which should be fibre-neutral. The very fact that each of the fibre sub-sectors i.e. cotton, man-made fibres, jute, silk, wool etc. has its domain with its own conspicuous problems and potential of each sub-sector, which should render the policy of being fibre-neutral, an unthoughtful decision. Other recommendations are the usual rut.


Para VI lists recommendations, almost all of which fall within the jurisdiction of State departments of agriculture, dealing with agricultural extension services. Should the Fibre Policy not leave the matter of agricultural extension services to the respective State Governments, and limit itself to project the needs of textile and garment industry in terms of fibre requirement at a competitive price level, timely and abundant availability of the same to the indigenous requirements and not getting too much worried about requirements of our competing neighbours who have been allowed to corner, for example, raw cotton or semi-processed cotton to our own risk and peril.


Para VII contains an overly concern beyond the Fibre, which is a case of over-stepping.


Para VIII relating to improving quality of cotton fibre is acceptable.


Para IX on improving infrastructure is legitimate.


Para X recommends trade policy for cotton for export of surplus cotton and imports in slots where they may be a deficit in domestic production, which is welcome, but the recommendation that there is no need for import duties could be damaging to Indian cotton growers in case of US and other countries undercutting the cotton prices and dumping cotton in India.


Paras XI, XII and XIII make recommendations that are acceptable.


Man-made fibres


Para1. Recommendation of having a fibre-neutral policy i.e. all textiles and fibres should attract the same excise duty i.e. 4% optional is without discretion. Each of the fibre has its own conspicuous problems and potential and to treat each and every fibre at the same footing would be depriving the different segments of fibre industry of their special and just requirements.


Paras 2, 3, 4 recommendations that are based on discretion-and not on fibre-neutral basis as is being recommended in Para 1 are logical and could be accepted. But then, it falls foul of the fibre-neutral policy.


Para 5 recommends export-oriented incentives should be provided to manufacturers of textiles and garments for a limited period to neutralize the impact of cost-disadvantage vis--vis exporters in competing countries, which is again going beyond fibre and spills over to recommending incentives for textile and garment exporters; hence outside its legitimacy and mandate.


Para 6 recommends textile industry to be kept out of GST for at least two years. What was the mandate for the National Fibre Policy? It was certainly not for jurisdiction of GST over textile industry. The draft Policy has clearly out stepped its area of study.


Para 7. Same as para 6.

 

Para 8 brings out clearly lack of coordination between two relevant ministries of Commerce and Textiles, so much so that need for involving Textile Ministry in any anti-dumping proceedings has to find a place in the recommendation in the proposed National Fibre Policy.


Para 9 brings out the need for introduction of an institutional mechanism wherein Government support (financial and otherwise) is made available to industry associations/players to initiate and defend anti-dumping proceedings, where necessary, which is perhaps not intended and limited only to man-made fabrics, as it appears under this section. Does the proposed National Fibre Policy intends to restrict this clause only to man-made fabrics?


Para 10 relating to MMF Advisory Council for passing of Excise duty and other concessions by MMF manufacturers to the parties down the line is clearly out of the jurisdiction and mandate of any Fibre Policy.


Para 11 pleads for priority to MMF manufacturing and processing units under Gas allocation policy, at par with the power sector, which is much beyond the scope and jurisdiction of any Fibre Policy.


Since cotton and man-made fibres are the only preponderantly important for the garment sector, I am limiting my comments only to these two sub-sectors.