Cabinet announces special package for textile sector to boost employment, exports

The union cabinet today approved a special package for employment generation and promotion of exports in the textile and apparels sector. The package includes a slew of measures which are labour-friendly and would promote employment generation, economies of scale and boost exports.

The steps will lead to a cumulative increase of $30 billion in exports and investment of Rs74,000 crore over the next 3 years.

The move is part of the package of reforms announced by the government for generation of 10 million jobs in the textile and apparel sector over next 3 years.

The majority of new jobs are likely to go to women since the garment industry employs nearly 70 per cent women workforce. Thus, the package would help in social transformation through women empowerment.

Salient features of the package announced are:

Employee Provident Fund Scheme Reforms

• The centre will bear the entire 12 per cent of the employers' contribution of the Employers Provident Fund Scheme for new employees of garment industry for first three years who are earning less than Rs15,000 per month.
• At present, the government provides 8.33 per cent of employer's contribution under Pradhan Mantri Rozgar Protsahan Yojana (PMRPY). The textiles ministry will provide an additional 3.67 per cent of the employer's contribution amounting to Rs1,170 crore over the next three years.
• EPF will be made optional for employees earning less than Rs15,000 per month
• This will leave more money in the hands of the workers and also promote employment in the formal sector.

Increasing overtime caps

• Overtime hours for workers not to exceed 8 hours per week in line with ILO norms. Overtime pay helps to increased earnings for workers.
• Introduction of fixed term employment
• Looking to 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, allowances and other statutory dues.

Additional incentives under ATUFS

• The package moves from input to outcome based incentives by increasing subsidy under Amended-TUFS from 15 per cent to 25 per cent for the garment sector as a boost to employment generation.
• A unique feature of the scheme will be to disburse the subsidy only after the expected jobs are created.
• Enhanced duty drawback coverage
• A new scheme will be introduced to refund the state levies which were not refunded so far.
• This move is expected to cost the exchequer Rs5,500 crore but will greatly boost the competitiveness of Indian exports in foreign markets.
• Drawback at All Industries Rate to be given for domestic duty paid inputs even when fabrics are imported under Advance Authorization Scheme.

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.