Transcript Document

Conference on
“Strategy for Making India a Global
Leader in Textiles and Apparels”
Stimulating Investments in MMF and
Fabrics
7th April 2015
Indian Textile Industry

Market Size : $110 billion
◦ Domestic Consumption : $70 billion
◦ Exports: $40 billion

Contribution of the Industry
◦
◦
◦
◦

14% of the industrial production
6% of the country’s GDP
13% of export earnings
35 million-strong workforce- 2nd largest employer after agriculture
The National Textile & Apparel Vision document envisions a target
of $650 billion by 2025 (domestic $350 billion and export $300
billion), from the current $110 billion.
◦ This requires investment of around $180-200 billion and is expected to create 35
million additional jobs
Indian Textile Industry
Indian textile industry is cotton based. In contrast globally,
MMF enjoys bigger share as shown below.
Fibre Consumption Pattern Profile (in %)
India
World
Non - Cotton
Non - Cotton
Cotton
Cotton
China- the World Leader


China- industry size of $532 Billion; exports of $260
Billion cornering 36% of the global textile trade.
MMF forms a staggering 80% of the total exports
India Exports
China Exports
Other Exports
MMF Exports
MMF Exports
Other Exports
OPPORTUNITIES- China Factor

China is expected to vacate nearly $100 billion of global trade space
over the next 5-6 years due to:
◦ Rising labour costs, appreciating currency, energy costs and focus on domestic
market
◦ Countries including India, Vietnam, Bangladesh and Sri Lanka potential gainers

Cotton consumption is expected to fall from the current 40% of the
global fiber consumption, to nearly 25%.

To reach the target of $650 billion with exports of $300, quantity of
textile fiber needs to be increased multifold
OPPORTUNITIES

In India, Cotton consumption represents around 60% of the total fiber
consumption

However, due to some factors, such as frequent fluctuation in cotton prices
and push by global brands towards polyester filament, MMF is gaining
momentum.

India accounts for less than 0.5% of the global trade of MMF fibres-based
textile and apparel products which indicate huge opportunity
◦ In domestic market too, preference for apparel made from MMF, is fast changing, in the ladies
wear, active wear, kids wear and uniforms, automotive furnishings, protective and medical
applications, etc.
◦ This is expected to boost demand for fiber to around 19 million tons by 2025
India Growth Potential
Kg/Capita
North
America
Australasia
All
MMF/Capita
Fibre/Capi
ta
 Low consumption centres point
at scope to grow towards the
36.9
22.5
28.6
18
South Korea
23.3
16.3
West Europe
23.1
16.2
Taiwan
Japan
Turkey
23
21
14.8
17.3
13.2
7.6
East Europe
14.1
9.3
China
Latin
America
South Asia
India
Africa/Middl
e East
14
12
8.9
4.9
fashion trends would favour
7.1
5.5
4.3
3.1
MMF consumption
4.7
3.3
11.2
7.7
World
global average
 India’s high GDP growth and
rising income levels would
catalyse textile consumption
 Young demography and changing
7
Fibre Mix Needs to Change Dramatically
• Even with conservative growth estimates fibre dynamics have to
change dramatically
• Availability of cotton in India with a global best yield of 750 kg/ha
will take Indian cotton production to ~8 Billion kg.
0.3
2014
2020
0.1
MMF
MMF
4.3
8.0
Cotton
Others
Cotton
Others
5.3
Volume: 10 Bn kg; Value: $110 Bn
11.8
Volume: 20 Bn kg; Value: $220 Bn
REQUISITES

This requires increased investment and MMF production from
about 4.3 billion kg to 11.8 billion kg
◦ This implies increasing the consumption of MMF from the present 40% to 60%
of total consumption

This target is achievable if provided right fiscal policies to
encourage investment in the sector
◦ Past experience shows reduction in MMF duty results in increasing the demand
for the same thereby neutralizing the impact on revenue
Key Proposals

An intermediate Excise Duty regime of 6% for MMF and Yarns
◦ The present duty of 12% should be reduced to 6% on MMF

Certain excise duty on cotton with entire textiles chain under CENVAT
Cotton
MMF
Cotton
Yarn
MMF Yarn


India
China
Pakistan
Bangladesh
Nil
12%
Nil
17%
17%
17%
Nil
Nil
Nil
Nil
Nil
1.5 Tk/kg
Sri
Lanka
20%
20%
20%
12%
17%
Nil
1.5 Tk/kg
20%
Indonesia
Thailand
10%
10%
10%
7%
7%
7%
10%
7%
Duty Rationalisation needed to treat MMF gradually at par with cotton.
The growth in revenue collection will be in the range of Rs 8000-10000
crores.
Prepare the industry for GST regime
Scenario 1- Only Cotton Yarn Under Excise
Scenario 1-Existing
Scenario II
(Current excise rate)
( Excise rate @ 2-6% -Cotton
Yarn included)
Excise Duty Rates
Naptha
PX
PTA
MEG
ACNPSF
VSF
Asf
Polyester Filament Yarn
VFY
100 % Non Cotton Yarn
PV Yarn
14%
6%
12%
12%
12%
12%
12%
12%
12%
12%
0%
0%
14%
6%
6%
6%
6%
6%
6%
6%
6%
6%
6%
2%
PC Yarn
Cotton Yarn
Cotton Fabric
Blended Fabric
100% non cotton
Garment
0%
0%
0%
0%
0%
0%
2%
2%
0%
0%
0%
0%
Excise collection (Rs-Crs)
7744
8214
Assumptions

Excise duty was calculated based on production . Imports and exports are not considered in this calculation as any excise duty collected in export will be refunded as duty drawback

The volume of cotton fabric has been assumed based on 25% of cotton yarn is exported out of the country

Garment volume has been assumed based apparel market size of USD 40 Billion
Scenario II- Entire Chain Under Excise
Scenario 1-Existing
Scenario II
(Current excise rate)
( excise rate @2- 6% -Cotton yarn
,Fabric & Garment included)
Excise Duty Rates
Naptha
PX
PTA
MEG
ACNPSF
VSF
Asf
Polyester Filament Yarn
VFY
100 % Non Cotton Yarn
PV Yarn
14%
6%
12%
12%
12%
12%
12%
12%
12%
12%
0%
0%
14%
6%
6%
6%
6%
6%
6%
6%
6%
6%
6%
2%
PC Yarn
Cotton Yarn
Cotton Fabric
Blended Fabric
100% non cotton
Garment
0%
0%
0%
0%
0%
0%
2%
2%
2%
2%
2%
2%
7744
9312
Excise collection (Rs-Crs)
Assumptions

Excise duty was calculated based on production . Imports and exports are not considered in this calculation as any excise duty collected in export will be refunded as duty drawback

The volume of cotton fabric has been assumed based on 25% of cotton yarn is exported out of the country

Garment volume has been assumed based apparel market size of USD 40 Billion
Proposals
(contd.)

Customs duty on Catalysts and Chemicals used for manufacture of
synthetic fibers/fabrics should be on par with raw materials.

Customs duty structure should be a cascading structure, i.e. the duty
differential should be progressive at each stage of value chain. To
encourage the domestic industry, following model is proposed:
Thank You