7 th April 2015

 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- 2 nd 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 is cotton based. In contrast globally,
MMF enjoys bigger share as shown below.
Non - Cotton
Fibre Consumption Pattern Profile (in %)
India
World
Non - Cotton
Cotton
Cotton



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

 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



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

Kg/Capita All
Fibre/Capi ta
MMF/Capita
 Low consumption centres point at scope to grow towards the
North
America
Australasia
South Korea
36.9
28.6
23.3
22.5
18
16.3
global average
 India’s high GDP growth and
West Europe
Taiwan
Japan
Turkey
East Europe
China
Latin
America
South Asia
India
Africa/Middl e East
World
23.1
23
21
14.8
14.1
14
8.9
7.1
5.5
4.7
11.2
16.2
17.3
13.2
7.6
9.3
12
4.9
4.3
3.1
3.3
7.7
rising income levels would catalyse textile consumption
 Young demography and changing fashion trends would favour
MMF consumption
7

• 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.
2014
MMF
Cotton
Others
5,3
0,1
4,3
8,0
0,3
11,8
2020
MMF
Cotton
Others
Volume: 10 Bn kg; Value: $110 Bn Volume: 20 Bn kg; Value: $220 Bn

 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



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
India China Pakistan Bangladesh
Cotton
MMF
Nil
12%
Cotton
Yarn
Nil
MMF Yarn 12%
17%
17%
17%
17%
Nil
Nil
Nil
Nil
Nil
Nil
1.5 Tk/kg
1.5 Tk/kg
Sri
Lanka
20%
20%
20%
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-Existing
(Current excise rate)
Scenario II
( Excise rate @ 2-6% -Cotton
Yarn included)
Excise Duty Rates
Naptha
PX
PTA
MEG
ACN-
PSF
VSF
Asf
Polyester Filament Yarn
VFY
100 % Non Cotton Yarn
PV Yarn
PC Yarn
Cotton Yarn
Cotton Fabric
Blended Fabric
100% non cotton
Garment
Excise collection (Rs-Crs)
0%
0%
0%
0%
0%
0%
7744
14%
6%
12%
12%
12%
12%
12%
12%
12%
12%
0%
0%
2%
2%
0%
0%
0%
0%
8214
6%
6%
6%
6%
14%
6%
6%
6%
6%
6%
6%
2%
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 1-Existing Scenario II
(Current excise rate)
( excise rate @2- 6% -Cotton yarn
,Fabric & Garment included)
Excise Duty Rates
Naptha
PX
PTA
MEG
ACN-
PSF
VSF
Asf
Polyester Filament Yarn
VFY
100 % Non Cotton Yarn
PV Yarn
PC Yarn
Cotton Yarn
Cotton Fabric
Blended Fabric
100% non cotton
Garment
Excise collection (Rs-Crs)
0%
0%
0%
0%
0%
0%
7744
14%
6%
12%
12%
12%
12%
12%
12%
12%
12%
0%
0%
2%
2%
2%
2%
2%
2%
9312
6%
6%
6%
6%
14%
6%
6%
6%
6%
6%
6%
2%
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

(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: