“INDUSTRY ISSUES & RECOMMENDATIONS” By Mr. S. Harishankar Chairman, Textile Machinery Manufacturers Association (INDIA) 20 th February 2013, New Delhi

2 TEI – AN OVERVIEW  The TEI in India is one of the five key engineering sectors.  Consists of more than 1400 units, with a total investment of Rs.7,800 crore  More than 80% of the units are SMEs  Capacity is Rs crore  Provides direct/indirect employment to > 250,000 people  TEI contributes greatly to the competitiveness of the Indian Textile Industry (TI).  Meets 45-50% of the demand of the Indian textile industry * (Source: Textiles Committee Survey & TMMA)

3 TEI – UPDATE Particulars (Estmtd) Production Import Export % Change in production -34%4%45%-14%9.3% % Change in import -16%-1%15%50%Nil

4 TEI – TECHNOLOGICAL CAPACITY  Ginning & Spinning: In general, at par with international standard. Foreign manufacturers have their presence in India  Capacity- Ginning - Adequate and there are exports  Spinning- Meets over 75% of the requirement  Items not manufactured - Auto Coner with auto feed and auto doff & high speed rotor spinning machine  Weaving Preparatory: At par with international standard. Enough capacity and production  Weaving (Shuttleless Looms) - Old technology Rapier looms (Crank Beat-up)  New technology Air jet & Waterjet Looms (not tested commercially well)  New technology Rapier looms (not tested commercially)  Synthetic Machineries: All kinds of synthetic machines are produced such as Draw Texturising, TFO Twister, H.S. Winder etc. except fibre/filament manufacturing chemical plant CONTD…

5 TEI – TECHNOLOGICAL CAPACITY  Processing Machinery: Technology gaps exists  Many hi- tech machineries are being manufactured for ex. Continuous Bleaching Plant, Dyeing Plant, Washing range, Preshrinking Range, Indigo dyeing Plant etc.  Some of the special purpose machineries are not yet developed  Existing capacity meets over 50% of the requirement  Parts/Components and Accessories:  Except some critical parts, most of the items are manufactured  High speed cam dobby, electronic dobby and jacquard not manufactured  Testing Equipments: At par with international standards- very limited imports  Other Items Not Manufactured:  High speed Garment making machinery & Knitting machinery  Machinery for technical textiles and Non-Woven and Embroidery machinery

6 COMPARISON WITH CHINA ParametersChinese Textile IndustryIndian Textile Industry Installed Spindleage105 million (up to )38 million (32 million working) Shuttleless Looms7.20 lac1.20 lac Total textile productionAbove US$ bnApprox. US$ bn ExportUS$ 147 bnUS$ bn Textile Machinery Production by Industry Rs bn (in )Rs bn (Reduced now) Import of 2nd Hand Machinery ProhibitedFreely permitted Technology Level of produced textile machines Entire range of High Tech Machineries are produced (due to JVs & FDI) Very Strong in Ginning & Spinning Machineries

7 TEI – RETARDATION OF GROWTH  Reasons:  Unhealthy condition of the domestic textile industry  Inconsistent Govt. policies - discontinuation of TUFS from time to time  Weaving sector suffered periodically due to bad market condition affecting the domestic machinery manufacturers. Other reasons are  Import of 2 nd hand cheaper shuttleless looms for modernization at ‘0’ duty  Unrestricted import of old looms in large quantities - manipulation of vintage  Duty Structure – no protection of domestic industry-no Level playing field- same technology Chinese looms cheaper by almost 10%  Few manufacturers of spinning, weaving and processing have either set up manufacturing facility or tie ups in China, others may follow  No R&D support and TUF scheme for the TEI with interest subvention to achieve the long term goal  One foreign collaboration for shuttleless Rapier loom is struggling to survive - no adequate order  No FDI in weaving sector

8 TEI - RECOMMENDATIONS 1. Excise Duty  Excise duty on all items of textile machinery, parts, components & accessories in general be at 8% from 12%, there should be no exemption.  Excise duty on all specified machinery and parts, components & accessories of the textile machinery in general should be 8% from 6%.  The uniform rate would help the Textile Engineering Industry to be more competitive as they would be able to rationalise their production programme and the cost reduction would be possible. Managing different rates of duty for different end product is difficult. 2. Custom Duty  Nil duty on the critical parts, components and accessories  Uniform rate of duty for all items is required.  Restrict the reduction of import duty (nil duty) for high tech shuttleless looms such as Rapier, Airjet and Waterjet looms with speeds above 350, 700, and 650 rpm respectively.  Remove Condition No. 5 for import of components under nil duty for manufacture of shuttleless looms should be done away with. Because when the shuttleless loom is imported, the exemption of duty (5%) on the complete value of the machine is much higher than that on the components (costing 30% - 40% of the total value of the machine)

9 POLICY MATTERS - SUGGESTIONS  Supply of local textile machinery to units under EPCG and EOU status should be treated at par.  200% weighted deduction on R&D expenditure should be allowed to all types of companies and partnership/ proprietary units.  Tax break for 5 yrs for any unit manufacturing hi-tech item of textile machinery with or without foreign collaboration.  Subsidy on imported textile machinery in 2 ND hand condition under the TUF Scheme and, 20% & 15% CLC Schemes should be stopped.  200% weighted deduction on expenditures made by the MSMEs and others on Skill Development, Technology development etc.  A modernization/ TUF for TEI with interest subvention (5%) and/ or margin money subsidy (20%) is an urgent need specifically for MSMEs.  Infrastructure development for TEI and for CG sector by providing CFCs with sufficient Government grants.  Removal of benchmarking process under TUF scheme or creation of a level playing field for Indian manufacturers

10 FTA - SUGGESTIONS FTAs need to be entered into with detailed analysis of the cost benef it ratio for the domestic industry 1.Will the domestic industry be benefited out of the FTA or incur loss? 2.If there is benefit for the domestic industry how it is worked out? 3.What is the % of benefit being extended to the FTA country and why? 4.The products for which The FTA is claimed by the FTA country is it being produced now or they propose to produce in future? There should not be any backdoor entry by other country. 5.Whether domestic manufacturers are producing the same product and already exporting to the FTA country? 6.If so, whether FTA country will allow zero duty for such exports? 7.Unless the respective Ministries are ready with positive answers to these questions, no FTA proposals should be made by them? We need not to be good to other countries affecting our own country adversely. There should not be any rush for FTAs.

11 Thank You