Industry divided over Budget boost for skill development

The Union Budget 2013-’14 has cheered the textile and apparel industry. Announcing a slew of incentives Finance Minister P C Chidambaram’s biggest move was the exemption of excise duty on readymade garments, a bug bear for

a long time. The industry has welcomed this move whole heartedly and it has put a smile back on the faces of brands and retailers.

Apart from the removal of excise duty on readymade garments, it also reduces red tape. The budget also highlighted a few other aspects that have been a point of concern for the entire industry. For example, a sum of Rs 1,000 crores has been allocated to skill development this time. There is also hope for allocation for the readymade garments sector, which would result in absorption of workers who have been displaced from agriculture for some reason and will ultimately help the government in solving employment problems. As Harminder Sahni, Director Wazir Advisors, points out, “The apparel industry needs skilled workers. Somebody has to invest in training people. There’s a lot of poaching and job hopping. The aim is to build a pool of people trained to work in the apparel sector.”

However, Jalaj Kakkar, CEO Remanika Apparels, is not too optimistic about the funds allocated for skill development. He says, “We are not sure how the funds will come down to us. This is skill development in textile but we are not sure if it’s for looms or manmade. You have to know where this money is going to be spend. Mills will benefit, but how they will benefit is the question.” Even Rajiv Nair, CEO Celio Future Fashion, is sceptical; “It’s difficult to say how the benefit will pan out. It remains to be seen how factories make use of this resource. At the moment I don’t see much use of this measure in the retail sector and especially at the front end.”

Meanwhile J Suresh, Managing Director and CEO Arvind Lifestyle Brands, views this investment as a huge opportunity for the Indian textile sector as cost of manufacturing in China is going up and all international players are looking at developing alternate regions of production. India definitely is top priority for them. “The country needs to develop its manufacturing sector if this opportunity is to be utilized. This budget allocation will help in developing skills of people in new areas of manufacturing,” he says.

Similarly, A Sakthivel, Chairman AEPC, opines, “We appreciate the fact that the ministry shall continue TUFs in 12th Plan with an outlay of Rs 2,400 crores. The creation of apparel parks within SITP and Rs 10 crores allocation will go a long way in increasing exports of value added textile chain.”

On the flipside, experts are concerned about other neglected aspects that could have been added in the Budget. Some say there should have been relief on service taxes and rentals. There are problems with getting goods across the country for apparel brands. Octroi, local entry taxes, are some of the constraining factors. A single taxation point, where goods can move freely between stores and counters, could have made all the difference.

“Processing seems to be an area where India is not doing well. When it comes to effluent treatment, different states have different norms. Typically people shy away from putting up money on processing units. In the overall textile value chain, processing as a category should also be focused on,” says Amit Gugnani, Senior VP-Textiles & Apparel Operations, Technopak Advisors. From the retail perspective, quality manpower from the front end is another issue that needs to be addressed. Additionally, infrastructure and a clearer road map for GST implementation were missed out in the Budget.

Despite reservations the industry unanimously feels the Budget has brought immense hope and optimism. The appeals of the industry has finally been voiced which is likely to benefit consumers and promote industrial growth in India. Overall, it has received thumbs up.