Home >Politics >Policy >Cabinet clears Rs6,000 crore package for textile sector
Govt cleared a `6,000 crore package for improving the textile sector’s competitiveness globally. Photo: Reuters
Govt cleared a `6,000 crore package for improving the textile sector’s competitiveness globally. Photo: Reuters

Cabinet clears Rs6,000 crore package for textile sector

The sops to garment manufacturers are meant to help India overtake Bangladesh and Vietnam in apparel exports over the next three years

New Delhi: The cabinet on Wednesday cleared a 6,000 crore package for the textile sector, aimed at generating 10 million jobs over the next three years and improving the sector’s competitiveness globally.

The sops, which include incentives related to tax, production and labour to garment makers, are meant to help India overtake Bangladesh and Vietnam in apparel exports over the next three years.

With China, the largest garment exporter, ceding ground to other countries on account of increase in wages and a shift to high-technology industries, the Indian government thinks it is the right time to push local manufacturing.

“Over the next three years, the 6,000 crore package will lead to an additional investment of $11 billion, generate one crore jobs and increase textile exports by $30 billion," said Rashmi Verma, secretary in the ministry of textiles.

Under the package, the government will bear the entire burden of employers’ contribution to the Employees’ Provident Fund (EPF) scheme for new employees of the garments industry earning less than 15,000 a month for the first three years. Also, EPF shall be made optional for employees earning less than 15,000 per month. The cabinet also approved overtime of up to eight hours per week, in line with global norms. The package proposes a fixed term of employment for the garment sector. The subsidy to the sector will be raised to 25% from the existing 15%.

The package will roll out a scheme wherein manufacturers can claim a refund from the central government on various state levies such as value-added tax and central sales tax that have been paid. It also proposes to relax the criteria for claiming tax benefits under the Income Tax Act.

UDAY extension

The cabinet decided to extend the deadline for states to join the Ujwal Discom Assurance Yojana (UDAY), which allows them to take over the debt of ailing state power utilities, by one year till 31 March 2017.

So far, 10 states have signed agreements with the central government to take over the outstanding debt of their power distribution companies. Nine others are in discussions with the centre, but since the original deadline for taking over half of the utilities’ outstanding debt expired on 31 March, an extension was necessary for more states to join the scheme.

States that join the scheme have time till the end of this financial year to take over 75% of the outstanding debt of utilities, the maximum that states are allowed to take over under the scheme, according to an official statement issued after the cabinet meeting.

Finance minister Arun Jaitley told reporters that states that could not sign the agreement last financial year could come on board now.

The scheme, announced on 5 November by the central government, specified that half of the outstanding debt was to be acquired in 2015-16 and another 25% in 2016-17. The remaining 25% will be refinanced through state-guaranteed discom bonds. As on 30 September 2015, distribution companies had a collective outstanding debt of 4.3 trillion.

Other decisions

The cabinet approved the establishment of a Fund of Funds for Start-ups at the Small Industries Development Bank of India, which will extend funding support to start-ups. This is in line with the Start-up India action plan unveiled by the government in January. The fund is expected to generate employment for 1.8 million people.

The cabinet committee on economic affairs approved the revamp of the 5.75km Mahatma Gandhi Setu, that connects north and south Bihar, at a cost of 1,742 crore. It also gave its nod to the four-laning of the 144km Hubli-Hospet section of National Highway 63 in Karnataka at an estimated cost of 2,272.20 crore.

The cabinet approved the signing of a protocol amending the agreement between India and Belgium for avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income.

It also decided to withdraw the Drugs and Cosmetics (Amendment) Bill, 2013. New legislation will be introduced to comprehensively review the existing law, the statement said.

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