POLICY TEXTILE & APPAREL NATIONAL
INDIA
By IFAB MEDIA - NEWS BUREAU - April 24, 2023 | 225 22 minutes read
The state of Odisha, with Bhubaneshwar as its capital, is comprised of 30 districts covering an area of 1.6 lakh square kilometers and a population of 4.8 crores, with a literacy rate of 73 percent. The state has two prominent ports - Paradip and Dhamra. With total GSDP of US$ 90 billion and 10.1 percent growth rate, the state contributes almost half of the major minerals produced in India with the highest proportion of mineral deposits, including Chromite, Nickel, Bauxite, Manganese, and Iron Ore, among others.
By Chandra Deep Mishra, Consultant, Wazir Advisors
Odisha reported Rs 206 crores of textile and apparel (T&A) exports in FY 2020-21 (Source: Government of Odisha). In 2016, Odisha released its first apparel policy which attracted few renowned manufacturers such as Shahi Exports, Aditya Birla Fashion and Wild Lotus. The state government is actively developing two textiles and apparel Parks, one near Dhamra and the other at Malipada with close proximity to Bhubaneswar, both equipped with essential facilities such as power, water, and other utilities. Additionally, Indian Oil is putting up a polyester fibre plant with 300 KTPA capacity to create a textile park in the vicinity (Source: Invest Odisha).
Odisha Apparel and Technical Textiles Policy – 2022
In 2022, government of Odisha came up with its new policy to promote the growth of the textile and apparel industry in the state and to create direct employment in the sector. The policy aims to support the manufacturing, trade, and export of textile and apparel, especially in the readymade garment and technical textiles units. It also seeks to empower women and attract skilled, semi-skilled, and unskilled workforce to the sector, generating rural non-farm employment. It aims to leverage skills development in the state and enhance the share of textile exports from the state.
The benefits provided under this policy are available only to newly established textile and apparel companies and additional units of existing companies in the state, which have commenced commercial production after the notification of this policy. The other conditions for availing benefit under the policy are that the unit should employ a minimum of 200 workers (including unskilled, semi-skilled, and skilled) with a workforce composition of at least 90 percent domicile of Odisha.
Fiscal incentives offered under the policy
A brief summary of various fiscal incentives offered to new manufacturing units in the state is mentioned below.
Fiscal incentives for apparel and technical textile units
|
S. No. |
Type |
Quantum of Assistance |
|
1 |
Employment Subsidy |
Rs. 6,000/female & Rs5,000/male worker (for 5 years) |
|
2 |
Capital Investment Subsidy |
40% subsidy upto Rs 50 crores on plant and machinery (for 5 years) |
|
3 |
ESI/ EPF Subsidy |
100% reimbursement of employer’s contribution towards ESI and EPF scheme (for 7 years) |
|
4 |
Land Subsidy* |
Subsidized rate of 50% on the concessional industrial rates |
|
5 |
Land Premium Exemption |
100% exemption on fees for conversion of agricultural land |
|
6 |
Stamp Duty Exemption |
100% exemption |
|
7 |
Power Subsidy |
o 100% exemption on electricity duty (for 10 years) o Reimbursement of Rs 2 per unit (for 10 years) o 100% exemption of cross subsidy surcharge, additional surcharges, and state transmission surcharges on renewable energy procured from state-based renewable energy plant. (for 10 years) |
|
8 |
SGST Reimbursement |
100% reimbursed |
|
9 |
Market Development Initiatives |
50% reimbursement of the actual cost incurred for participating in domestic and international exhibitions/trade events. |
|
10 |
Environment Friendly Infrastructure Incentives |
o 25% subsidy on new plant and machinery and the cost of new technical civil works for the green measures i.e., green buildings, wastewater treatment facilities, effluent treatment plants, and deep-sea discharge facility. o 50% capital subsidy on cost of equipment used for zero liquid discharge |
|
11 |
Incentives for Innovation and R&D |
50% assistance upto Rs10 crores on investments subject to the academia (R&D institutions, technical and scientific organizations) |
|
*except for the areas covered under the Bhubaneshwar Development Authority and Cuttack Development Authority; only for units creating direct employment of more than 1000 state-domiciled people |
Non-fiscal incentives offered under the policy
The state has established a 3-tier single window clearance mechanism to facilitate the speedy implementation of industrial projects.
A-The District Level Single Window Clearance Authority (DLSWCA): Responsible for providing necessary approvals and direction for projects up to Rs 50 crore at the district level.
B- The State Level Single Window Clearance Authority (SLSWCA): Chaired by the Chief Secretary, this provides overall guidance and approvals for larger projects of more than Rs50 crores.
C- High-Level Clearance Authority (HLCA): Chaired by the Hon'ble Chief Minister, which provides approvals for projects of more than Rs 1000 crore.
The Odisha Industrial Infrastructure Development Corporation (IDCO) has been authorized to engage in public-private partnerships with prominent agencies for the purpose of developing world-class industrial infrastructure.
Estimation of Quantum of Incentives Available for a Garment Factory
To understand the quantum of incentives that are being offered by the state of Odisha, let us consider the following project for setting up an export-oriented sewing factory:
Number of machines: 500
Land required: 5 acres
Employment: 1,000
Total project cost: Rs. 25 crores (including land, building, machinery, utilities, margin money for first year’s working capital and preliminary & pre-operative expenses)
Average wages: Rs. 10,000 per month
Taking into consideration various operations benchmark & assumptions, this project will have an entitlement of various subsidies as given in table 1.
|
Category |
Approx. Subsidy (in Rs. Crores) |
|
Employment Subsidy (Rs. 5,000 per male & Rs. 6,000 per female for 5 years) |
26.1 |
|
Capital Subsidy (40% subsidy) |
10.0 |
|
Land Subsidy (50% subsidy) |
4.3 |
|
ESI & EPF Subsidy (100% reimbursement for 7 years) |
2.4 |
|
Power Subsidy (Reimbursement of Rs. 2 per unit and 100% exemption on duty for 10 years) |
0.5 |
|
Market Development Subsidy (50% subsidy; can be availed 2 times for domestic and international fairs each) |
0.2 |
|
Total |
43.5 |
Table 1: Estimate of available subsidy for a garment unit
The manufacturer may claim a total subsidy of Rs 43.5 crores which is approximately 1.75 times the total investment.
In conclusion, the policy represents a notable progress towards advancing investment and employment opportunities in the state. Given the capital- and labor-intensive nature of the textile and apparel industry, this sector is poised to receive substantial support through these incentives. Furthermore, the policy's streamlined 3-tier single window mechanism is expected to facilitate ease of comprehension and accessibility for prospective investors.
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Chandra Deep Mishra, Consultant, Wazir Advisors Chandra is a textile engineer with Masters in Fashion Technology from the National institute of Fashion Technology (NIFT). He has two years of practical experience in textile and garment manufacturing as well as in merchandising. Prior to joining Wazir, Chandra was associated with leading textile and garment manufacturing companies. Some of the representative's work includes:
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Wazir Advisors Over the years, Wazir has placed itself as a premier Indian consulting organization with a special focus on textile and apparel value chain. Their team of textile engineers, sector experts, management graduates and economists, have executed a broad range of consulting projects working for reputed Indian and international clients. Wazir has partnered with ITA Germany, an international research institute under RWTH University, Aachen, for offering sustainability and digitalization solutions to textile and apparel players in India and other South Asian countries. With combined expertise, Wazir- ITA can be your solution provider in the shift towards a sustainable future.
