Jobs for 1 crore people, mostly women; US$ 30 bn. in exports; and investment worth Rs. 74,000 crores – all in three years. These are the expected outcomes of a special package for textile and apparel sector, approved today by the Union Cabinet under the Chairmanship of Prime Minister Shri Narendra Modi.
The package is a strategic decision that would strengthen and empower the Indian textile and apparel sector by improving its cost competitiveness in the global market. The measures assume significance due also to its potential for social transformation through women empowerment; since 70% of the workforce in the garment industry are women, majority of the new jobs created are likely to go to women.
What’s in the Package?
The special package includes a slew of labour-friendly measures that would promote employment generation, economies of scale and boost exports.
The salient features of the package are:
A. Employee Provident Fund Scheme Reforms
- Govt. of India will bear the entire employer’s contribution of 12% under the Employers Provident Fund Scheme, for new employees of garment industry earning less than Rs. 15,000 per month, for the first three years.This marks an increase from the present Government provision of 8.33% towards employer’s contribution, being provided under Pradhan Mantri Rozgar Protsahan Yojana (PMRPY). With today’s decision, Ministry of Textiles will provide the remaining 3.67% share towards employer’s contribution, amounting to Rs. 1,170 crores over next 3 years.
- EPF will be made optional for employees earning less than Rs. 15,000 per month. This will leave more money in the hands of the workers and also promote employment in the formal sector.
B. Increasing overtime caps
- Overtime hours for workers not to exceed 8 hours per week in line with ILO norms. This shall lead to increased earnings for the workers
C. Introduction of fixed term employment
- Considering the seasonal nature of the industry, fixed term employment will be introduced for the garment sector.A fixed term workman will be considered at par with permanent workman in terms of working hours, wages, allowanced and other statutory dues.
D. Additional incentives under ATUFS
- The subsidy provided to garmenting units, under Amended-TUFS, is being increased from 15% to 25%, providing a boost to employment generation.The package breaks new ground in moving from input-based to outcome-based incentives; a unique feature of the scheme will be to disburse subsidy only after expected jobs have been created.
E. Enhanced duty drawback coverage
- In a first-of-its-kind move, a new scheme will be introduced to refund the state levies which were not refunded so far. This move will greatly boost the competitiveness of Indian exports in foreign markets and is expected to cost Rs 5500 crores to the exchequer.
- Drawback at All Industries Rate will be given for domestic duty paid inputs even when fabrics are imported under Advance Authorization Scheme.
F. Enhancing scope of Section 80JJAA of Income Tax Act
- Looking at the seasonal nature of garment industry, the provision of 240 days under Section 80JJAA of Income Tax Act would be relaxed to 150 days for garment industry.
A summary of the expected impact of today’s Cabinet decision is given below, in quantitative terms: