Telangana Minister KT Rama Rao writes a letter to union textile minister Smriti Irani

Telangana Minister for textiles KT Rama Rao wrote a letter to Union Minister Smriti Irani on the impact of Covid-19 on handlooms and textile industry. In his letter he said,

"I am taking this opportunity to write to you with some views about the impact of the COVID-19 pandemic on the Indian Handloom, Textiles and Apparel Industry. As you are aware, we have placed high emphasis on the sector to create jobs for our local population and to contribute to the country's GDP and exports. I also recall your encouraging words when I personally called upon you a few months back.

For India, the sector holds added importance due to its potential to create jobs which is better than any other sector. The parameters of jobs created for every unit of investment and every unit of land are the most favourable in textiles, compared to any other industry. Therefore, it is imperative that the State Governments and Central Government work together to protect the millions of livelihoods that depend on the sector.

Telangana has placed higher importance on the textile sector, as also handlooms, with a view to creating jobs. We have textile parks coming up to Warangal and Sircilla, and we have received commitments from global/domestic investors. Telangana also has a rich tradition of handlooms, through the specialities of Pochampally Ikat, Gadwal Cotton, Silk & Sico sarees, Narayanpet Cotton and Silk sarees, Gollabhama sarees, etc.

Present Status of Handloom & Textiles and impact of COVID-19

As you are well aware, COVID-19 has affected the entire world. The textile sector is unique in its global structure, wherein Asia including India has established itself as a producer while the consumption is dominated by Europe and USA (which together account for 65% of the finished product i.e. apparel), thus leaving huge scope for foreign exchange earnings for a country like India. Our country has been doing well and has met competition from other Asian countries, however, needs to do a lot more. India is an important member of the global supply in textiles and apparel. We are ranked 6th in textile and apparel exports, at about USD 36 billion. Our rich tradition of handlooms also contributes to exports of about USD 350 million every year. There is a lot of scope for enhancing our exports by encouraging the industry to invest more, and also attracting foreign investors, thus creating more jobs. Our close competitors like Bangladesh and Vietnam have been performing exceptionally on the export front and there is no reason why India cannot dominate the global trade in apparel.

Consumption patterns across national/ international markets will change in post COVID world, e.g. more spending will be on healthcare, resulting in higher opportunities from healthcare institutions and also the technical textiles segment which caters to medical textiles. Retail channels will shift more towards online than brick and mortar stores, which point to need for fast fashion and quicker turnaround at the factory. This points to better integration of the segments i.e. having integrated textile zones to improve efficiencies.

I have been interacting with members of the textile industry, both within our state and outside. The common refrain is that the recovery will be very slow and will be contingent upon the Western world commencing regular operations. Several companies have seen their orders cancelled and shipments put on hold and are facing zero revenues and cash flows for the next 4-6 months, in the best-case scenario.

Given this situation, I am seriously worried about the sustenance of the industry and the resulting impact on the livelihoods of millions of workers. On the other hand, it is obvious that the large global consumers will have to de-risk their supply chains and reduce dependence on major suppliers like China. This offers a huge opportunity for India to attract further investments to meet the resurgence in the consumption a few months down the line.

In this scenario, I am of the opinion that we should address the issue of protection of livelihoods as well as exploit the emerging opportunities for creating new jobs and increase our exports. I would like to make the following suggestions to meet the immediate and medium-term requirements to protect our industry and create more jobs for our people.

Short term policy support required

Resumption of operations – Reassurance to workers

Wage Support: Providing wage support of up to 50% of wages, contingent on continued employment of the workforce. This support can be given for a period of up to 6 months, in the form of a long-term loan which the industry would need to repay in instalments after a stipulated period. I understand Bangladesh Govt is giving a similar support package to its garment industry.

Statutory payments: Allow the industry a one-time extension of 3 months for the deposit of statutory dues of PF and ESI. This will release some cash for the industry.

These measures will benefit the workers employed in the sector and will provide a source of reassurance for their continued employment.

Banking support

Facilitate higher temporary credit facilities (up to 30% of current limits) to meet the cash losses during this slowdown, so that it will enable the industry to meet its obligations towards its vendors and statutory payments so that the entire supply chain is protected. The Govt of India could consider funding this through a concessional line of credit so that the banks are adequately supported, and the funds return to the Govt in due course.

Interest Subvention / Moratorium: While the RBI has already announced measures to improve liquidity and reduce the interest rates, this can be further augmented by a complete interest waiver or an interest subvention scheme of 2-3% on all loans (including working capital credit) availed by the sector as has been done in the past under TUFS. Further, a special moratorium of 1 year may also be considered.

Asset classification: RBI may be requested to allow the banks not to downgrade loan accounts by giving a grace period of 6 months to 1 year. Otherwise, many regular accounts may be classified as NPAs affecting their long-term track record.

Incentives to Exporters

Govt of India has announced the Rebate of State and Central Taxes and Levies (RoSCTL) scheme for apparel and made-ups segment. It is important that RoSCTL is extended to other segments like yarn and fabric as well. This will enable the intermediate segments to improve their operational sustainability.

Govt of India may also consider additional incentives to exporters for a period of 1 year to tide over this crisis. Any incentives to exporters will also indirectly support the domestic value chain.

GST refunds: A common refrain from the industry is for expediting the pending refunds of GST, which will release cash and in turn enable the industry to meet payments to workers and other vendors.

Handloom Sector

In order to support the handloom sector in these difficult times, steps should be taken to enable a wider market for the piled-up handloom fabric and finished products on national and international e-commerce platforms. This could also be supported through institutional buying by Govt of India owned corporations like KVIC, Cottage Industries Emporium, etc. An aggressive "Be Indian, Buy Indian" initiative by Govt of India is the need of the hour, and our State Government will provide wholehearted support for it. These measures will help in releasing cash and thus protect the lakhs of households dependent on handlooms.

Further, in order to encourage faster reboot of the sector, Govt of India could consider 50% yarn subsidy across the handloom industry. As a special case, the GST Council should also consider complete waiver of GST on handloom products for a period of 2 years to boost the sector.

Our Government has taken various steps to support the handloom weavers so that they are able to regain their market with their niche products. We have recently completed a detailed census of handlooms across the state including geo-tagging of each and every handloom in the state so that we can provide directed benefits to the weavers working on these handlooms and ensuring that the financial support is directed to the deserving weavers. A similar initiative can be considered at the national level as well.

Medium-term

Promoting Manmade Fibres: Globally, the proportion of manmade fibres in total fibre consumption is more than natural fibres, unlike in India. However, the trend in India is moving towards manmade fibres with the growth of segments like fashion wear, activewear, etc., in line with global trends. Further, the growth of technical textiles will also require synthetic materials. New investments are more likely to be in these segments. To support this, correcting the inverted duty structure under GST on man-made fibres would be another strategic step required.

Cotton procurement support: Transfer subsidies directly to cotton farmers' accounts through direct benefit transfer (DBT) instead of offering a minimum support price (MSP) for their produce. This will avoid the distortion of prices of raw material which are inputs to the downstream spinning industry.

Attracting Investments by industry

As you would be aware, the ability of the Indian industry to make fresh greenfield investments is limited given the current scenario. However, the investment scenario will improve in a few months, and it will be necessary for us to prepare ourselves to make these investments happen.

I understand that the Govt of India is considering setting up of large textile zones and would certainly request you to take this up on priority as it will support the entire country. In Telangana, we have taken up the Kakatiya Mega Textile Park (KMTP) at Warangal as a strategic project to support this vision. We are already seeing a lot of interest from national and international investors in the project. In this regard, expediting the Mega Textile Park Policy, presently under consideration at the Ministry of Textiles, will go a long way in supporting industrial infrastructure creation at a rapid pace. Further, speedy approvals for the project under IPDS scheme will also help.

Further, in our projects, we have provision for plug and play infrastructure, whereby ready to use buildings will be provided to industry to quickly start operations. I am glad to know that during a recent meeting of the Hon'ble Prime Minister with the Cabinet, this option is being considered across the country.

In order to enable the prospective FDI investors to look at India more favourably, it will be necessary to provide some form of support towards wage cost and power cost, which are two major factor costs for the industry. Here, I would request the Govt of India to consider the following:

reintroduce the scheme for supporting the employer's contribution towards PF, ESI, as done earlier for the apparel and made-up sector, and extend it for all segments

provide some for an additional wage subsidy for a limited period linked to certain commitments from the industry

The above measures would be a huge boost in supporting the existing industry and attracting new investments in textile, technical textile and apparel sectors and will take the reforms initiated last year through lowering of corporate tax rates, further. I am confident that we will also be able to attract MNCs planning to shift their manufacturing from high cost and / or high-risk geographies to India.

Looking forward to partnering with the Ministry of Textiles in these challenging times.