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New textile policy 2019: State govt ends incentives for ginning, spinning sectors

Ginning and spinning have been struck off from a list of over eight manufacturing activities that will be eligible for incentives under various schemes, including credit linked interest subsidy of 6 per cent for MSMEs and 4-6 per cent for large enterprises.

Under the state’s new textile policy 2019 announced on Thursday, the government has removed incentives for two crucial activities — ginning and spinning — that occupy an important role in the textile value chain.

Ginning and spinning have been struck off from a list of over eight manufacturing activities that will be eligible for incentives under various schemes, including credit linked interest subsidy of 6 per cent for MSMEs and 4-6 per cent for large enterprises. “Sectors like ginning, spinning and technical textiles saw tremendous growth during Gujarat Textile Policy 2012… The state government analysed the existence of all segments in the textile value chain and identified gaps in certain segments. After careful consideration, the government has decided to come out with a new scheme to strengthen the value chain and extend support to textile industry in the state of Gujarat,” states a copy of the new policy accessed by The Indian Express.

The move to exclude spinning and ginning units is significant, considering that in the 2012 textile policy — that remained in force till September 3, 2018 — credit linked interest subsidy of about 7 per cent was provided to spinning units, which included those using 100 per cent cotton or blended with any textile fibers. Ginning activities were also covered under this subsidy. The government while providing these incentives five years ago had pointed out that “due non-availability of spinning activities, over 90 per cent of Gujarat’s cotton goes to other states for further value addition, and therefore there is a need to transform the state cotton industry as the leader in manufacturing yarn, fabric and garment with a policy to work on five Fs — Farm, Fibre, Fabric, Fashion (Garment) and Foreign (Export).”

Capacity of ginning, spinning ignored

While the 2012 textile policy was focussed on increasing the spinning capacity to meet the domestic and global yarn demand, the new 2019 policy talks of “tremendous growth” underlines the excess capacity that exists in spinning and ginning segments of the textile value chain in the state. It goes on to exclude both segments from the various incentives proposed under the new policy.

Garments and apparels have also been excluded from incentives scheme under the new policy as these two sectors have been given a separate incentive scheme under the Gujarat Garment and Apparel Policy, 2017 issued in October, 2017.

Commenting on the exclusion of ginning and spinning units from the incentives scheme, veteran textile expert Dr P R Roy said, “This is a mistake many governments have made in the past. If you study the textile value chain, ginning and spinning are starting points and ginning takes care of raw material (cotton), which is the most valuable for the country. For some years to come — till India switches over to man-made fibres — cotton would be key area that must continue to get support. So I feel these groups should get continued support.” Saurashtra region has a sizable concentration of ginning and spinning units.

The new policy — that mentions that Gujarat has more than 30 sanctioned textile parks, the second highest among states — also offers incentives for establishing more textile parks in the state, which includes financial assistance of 25 per cent of capital expenditure for common facilities up to a maximum of Rs 15 crore. The developer of such parks will also be eligible for a reimbursement of 100 per cent stamp duty paid on purchase of land required for the new park. “In the last couple of years, we have not seen that from textile parks. The intention to set up parks was good, but it has not been fulfilled,” Roy said.

It also provides power tariff subsidy to weaving activities and assistance for technology acquisition and upgradation.

The Gujarat Chamber of Commerce and Industry (GCCI) that had presented a host of suggestion for the new textile policy described it as a “mixed bag”. The industry body expressed dissatisfaction with the incentives provided in a single slab of 6 per cent to MSMEs. It also said that the move of the state government to make EPF registration mandatory for units to avail interest subsidy could prove to be “difficult” as the “textile industry is a seasonal industry, which significantly relies on contract labour.”

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