The Clothing Manufacturers Association of India, (CMAI) has written an open letter to Nirmala Sitharaman, Minister of Finance outlining pre-Budget recommendations. The association has urged the government to consider key financial aid that can help the industry recover from the aftermath of the Covid-19 pandemic.
Government support for MSME sector
The letter states how the Indian garment industry, whose manufacturing is solely dependent on retail, is the worst affected, in view of the stringent lockdowns, partial lockdowns, and an on off approach to markets being allowed to operate. What compounds the problem is the fact that more than 80 per cent of the garment industry is within the MSME sector, with its own constraints of finance and sustaining power.
Rajesh Masand, President, CMAI, explains it is therefore, essential that the garment manufacturing sector, which is the highest employer in the country after agriculture, gets strong support from the government if it has to survive and recover in coming years. The upcoming Budget for 2021-22 is an ideal opportunity for the government to extend this support to the MSME sector in this crucial industry. Support to this industry will also add tremendous fillip to the ‘Atmanirbhar Bharat’ philosophy of the government.
CMAI, also states how in the financial year 20-21, many companies will face a drastic drop in revenue and profits and it would impact them financially. This would create a situation where banks might drastically curtail or withdraw credit facilities. Hence, CMAI recommends banks should continue giving Drawing Power (DP) based on 2019-20 performance, and not give weightage to the 2020-21 numbers. Furthermore, companies showing any ‘Loss’ return in Income Tax should be not an automatic candidate for scrutiny, as this year it is possible that many companies might incur heavy losses .
GST at 5%, better interest rates
Although retail sales have shown some signs of pick up, it is still struggling at around 60 to 65 per cent of last years’ sales. Consumers are yet to build sufficient confidence to resume normal shopping – especially when it comes to discretionary spending. Hence, the association has strongly recommended the current distinction in GST rates below and above Rs 1,000 is removed, and a uniform rate of 5 per cent GST is applied.
The association also recommended at least for a period of one year, domestic manufacturers are offered working capital interest rates at the same rate as exporters to provide a huge relief to the manufacturers.
The government is contemplating an outstanding PLI Scheme, which for the textile sector been converted to a FPLI Scheme. One of the qualifying criteria for this scheme is a current base turnover of Rs 100 crores. For the garment sector, and especially the domestic sector, there are only a miniscule number of manufacturers who would qualify for this criterion. To really give a massive push to the avowed objective of pushing MMF sector, the association strongly believes the minimum turnover criterion be reduced to Rs 50 crores, for this scheme to be effective.