Incentives for India’s Textiles Industry

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Oct. 25 – India’s Foreign Trade Policy (2009-14) announced by the Union Minister of Textiles, provides various incentives for the country’s textiles sector. The sector has been stumbling lately under financial uncertainty at the global level as well as pulls and pressures at the domestic level.

“A multi-pronged strategy has been adopted by providing a stable policy regime, adopting a conscious market diversification plan and providing additional support to sectors hit badly by the global recession. The Ministry also encouraged technological up-gradation of export sectors, and undertook a simplification of procedures to reduce transaction costs and decided to consolidate India’s traditionally strong sectors of the economy while focusing on sunrise sectors as well,” according to the Ministry of Textiles (MoT).

The Ministry has decided to widen the Market-Linked Focus Product Scheme (MLFPS) for exports under Chapter 61 and 62 and a 2 percent duty credit will be available to them for exports made to the United States and European Union from April 1, 2011 to March 31, 2012.

Financial support of 2 percent on Rupee Export Credit has been extended until March 31, 2012 for handlooms, handicrafts, carpets and all small and medium enterprises. In order to expand the coverage of products under the Focus Product Scheme (FPS), the Minister has decided to include 130 new items covering 10 product sectors, specifically including chemicals, pharmaceuticals, textiles, handicrafts, engineering and the electronics sector which will get a 2 percent duty credit under the scheme. Chemicals such as soda ash, textile items like polyester yarn, woven cotton fabric denim, unbleached or bleached cotton fabrics, as well as knitted and dyed cotton fabrics are covered under the plan.

Relief announced by the Ministry
Support to the apparel sector
The apparel sector is growing these days and has high potential to achieve increased levels of exports and generate employment opportunities.

Chapter 61 and Chapter 62 items were approved duty credit under MLFPS for export to the United States until September 30, 2010 and for exports to the European Union up until March 31, 2011. Though, at present, the readymade garments are not covered under the FPS/MLFPS, it has been decided to extend MLFPS for exports to the United States and the European Union under Chapter 61 and Chapter 62.

The proposal would cover everything that was covered under Chapter 61 and Chapter 62. The duty credit would be accessible to exports made during January 4, 2011 to March 31, 2012 at 2 percent of the FOB value of exports.

Focus Product Scheme
The catalog of items under FPS has been prolonged to comprise 130 additional items. These items are largely in the chemical/pharmaceuticals, textiles, handicrafts, engineering and electronics sectors.

Textile objects like polyester textured yarn, fully drawn yarn of polyester, viscose rayon type yarn, polyester chips, woven cotton fabrics denim 85 percent cotton over 200G/M2, unbleached or bleached cotton fabrics, and dyed cotton fabrics knitted or crocheted have been incorporated under the system.

The items covered under FPS are allowed to get duty credit scrip at 2 percent of FOB value of exports.

‘Niryat Bandhu’ – A scheme for international business mentoring
This scheme is for mentoring first generation entrepreneurs. The officer (Niryat Bandhu) would function in the “mentoring” arena and would be a “handholding” experiment for the young entrepreneurs in global business enterprises.

According to the plan, officers of India’s Directorate General of Foreign Trade (DGFT) will be investing time and knowledge principally to mentor interested individuals who want to carry out business in a legal way.

Procedural simplification
The application of IEC has become online w.e.f. January 1, 2011. This reduces the crossing point of exporters with the regional authorities of the DGFT. An effort is also on to update the IEC database containing more than 7.6 lakhs of IEC. All IEC holders are being urged to cooperate in this effort and update their details online. This will be put into effect by March 31, 2012.

The DGFT has also become India’s first digital signature enabled department in the government of India, which has introduced a higher level of the Encrypted 2048-bit Digital Signature. Digital certification provides a high level of security for online communication such that only the intended recipient can read it. It provides authentication, privacy, non-repudiation and integrity in the virtual world.

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