The enhanced rate of rebate of central and state levies for the Indian apparel and made-ups exporters is a much needed stitch in good time! It improves the competitiveness of the Indian exporter many folds in the fierce international marketplace.
The Ministry of Textiles of India has notified the scheme for Rebate of State and Central Taxes and Levies (RoSCTL) on export of garments and made-ups through a scrip based system on 7 March, 2019.
(AN ARTICLE WRITTEN FOR CHAIRMAN, AEPC FOR ET RISE)
AEO is a worthwhile investment for any garment
manufacturer whose organization
is involved in international supply chain. The status is attributed to only
those organisations that maintain safe, secure and compliant international
trade procedures. For those of you who are new to this, AEO or Authorised
Economic Operator is an internationally recognised status which demonstrates
that your organisation operates both efficient and compliant customs controls
and procedures. In this era where business efficiencies are defined by speed,
AEO accreditation can help fast-track shipments through customs and security
procedures by providing quicker access to simplified custom procedures. In some
cases, the benefit may also include waivers for guarantees. AEO offers a number
of other benefits, including lower rate of physical inspections of
imported/exported goods, faster release of shipments, preferential treatment by
Customs Authorities, and deferred payment of duties, to the companies that meet
compliance criteria and demonstrate the security of supply chain. Therefore,
there is undeniable wisdom in getting the certification even though it is not mandatory.
Customs
organizations all over the world face the twin challenge of securing the
borders from unlawful trade and simultaneously facilitating and speeding up
legitimate trade. These are exactly the objectives that AEO works towards achieving.
Globally, AEO certification is
gradually evolving into an industry standard for claiming eligibility to any
administrative and governmental discretions, priority and facilitation. In my
opinion, it will not be any different in India as well, very soon.
While
AEO certification has been offered since 2012 in our country, the Central Board
of Excise and Customs has re-launched a more effective and reworked three-tier
AEO programme merging the ongoing Accredited Clients Programme (ACP) & AEO
programme recently. This has certainly been received well by the exporter
fraternity and found to be very useful. Further, the Government has made the
process of AEO certification a time bound exercise, which implies that AEO-T1
certification can be obtained within a period of one month after submission of
required documents by your organization. Further, AEO-T2 & T3 certification
can be obtained between a reasonable three-five month period.
If you
are an organization, established in India involved in global trade such as
Importers, Exporters, Cargo Agents, Warehouse Operators, Port Operators,
Carriers and Customs House Agents irrespective of the size of your business,
you are eligible for AEO certification. Also since AEO status is not location
specific, it applies to a particular entity as a whole. Each entity needs to
apply for AEO certification separately. It is no uphill task to be eligible for
AEO or apply for it. An applicant needs to provide the Standard Operating
Procedures and details of the following at the time of application:
Site
plan details
Business
partner details
Legal
compliance, i.e., no issuance of show cause notice/ prosecution case
Security
plan details
Safety
and Security standards
Managing
commercial and transport records
Process
map for movement of goods
Financial
solvency status
If you
an exporter, there is a three tier system of certification, with varying levels
of benefits- T1, T2 and T3 What makes
the process faster and efficient is also that in case of T1 certification, no
physical verification is conducted and only the application is reviewed.
Physical verification by AEO
Programme Team is conducted to verify compliance with the above requirements
for the grant of T2 and T3 certification within 90 days of application. The AEO
specialists conduct onsite visit of domestic facilities to confirm the security
practices are in place and operational in case of higher certification levels. The team prepares the reports with
recommendation to the AEO Programme Manager within 60 days of completion of
onsite verifications.
Once
you are an AEO certified exporter in India, you are likely to get varying levels
of benefits from the importing country, as per India’s MRA (Mutual Recognition Agreement)
with the respective country. Under the Mutual Recognition Agreements (MRA), the
customs authority of exporting countries or regions ensures the safety and
authenticity of export shipments before export and the customs authority of the
importing country or region ensures the preferential customs treatment for AEO
certified entities at time of import. While India has a well negotiated MRA
with a few countries, the MRA with few other significant importing destinations
is underway.
With
more and more countries committing themselves to the efficient implementation
of AEO or frameworks similar to AEO, this is certainly the trade language that
the future will speak. Numerous Mutual Recognition Agreements have been
concluded and many more are in negotiation, as I write this. There is, thus, an undisputed merit
for an MSME in Apparel export to enrol for AEO certification.
Support by various State Governments to the Apparel sector
(AN ARTICLE WRITTEN FOR CHAIRMAN, AEPC FOR ET RISE)
Employment
is the key to transforming a community. State Governments have now realized the
enormous potential of the Apparel sector to create jobs and empower women. They
have been quick to take action and create an investor friendly policy direction
and environment to entice those interested in striking or spreading roots on
their soil. This presents a rare opportunity for MSME Entrepreneurs to set up
or expand their manufacturing facility.
Recent reforms in the country have made it clear that the
role of the State stands redefined. With the transformed role of the
Government, from a mere monitoring agency to collaborators and partners in
growth, the climate could not be friendlier for any MSME looking to grow.
Research and records have established the high potential of
the Apparel sector to create about 70 jobs for every Crore rupees invested,
much higher than the other manufacturing sectors. As high as Rs. 26000 Crores
are given out as salaries and wages every year by this industry. The most
significant advantage lies in the high employability of women in this sector at
every level- from a sewing machine operator to the CEO of a brand. While the
Ministry of Textiles has left no stone unturned to support the sector at the
national level, the State governments have laid out extensive policies to dole
out further benefits for entrepreneurs and brands.
It has also been well understood that ease of doing business
is the single most important window to a world of opportunities and growth.
Apart from providing incentives in kind and financial benefits to
entrepreneurs, each state government has put in focussed effort to reduce
cumbersome documentation in the process of starting something new. On this
metamorphic journey from red tape to red carpet, well appointed single points
of contact have been created for understanding of policies and availing the
benefits. While the going may be still difficult in some lands, others have
made drastic efforts to improve the processes involved. I will discuss about
the positive support extended by some State governments here, in particular and
a few salient features of their respective policies.
The states which have constituted special policies for
significant benefit of Apparel manufacturers include Chhatisgarh, Gujarat, Jharkhand,
Karnataka, Orrisa, Uttar Pradesh and West Bengal. Other states, like
Uttarakhand and Telangana, have also been proactively working on wooing the
Apparel manufacturers to their land. There is a common myth about such policies
being friendly only for those with deep pockets, however, i would like to
differ on this and clarify that the pre conditions and barriers have been
lowered and set suitably.
Chhattisgarh
, a young state, formed in 2000, has been quick to accelerate
its process of industrialization, realising its importance in creation of
livelihoods and a consequent better life for it’s people. Chhattisgarh has been
declared one of the best fiscally managed states by the Reserve bank of India-
which speaks a lot about the ease of doing business in the state. It has become
a hotbed for Startups across a variety of sectors from IT to power and
medicine. Eighteen years young a state, it provides an obvious advantage of
being the first mover and capturing the domestic markets as well. The state boasts
of a very rich labour pool and it is important for an Entrepreneur to know that
Chhattisgarh has one of the lowest reported loss of man- days attributed to
labour problems, in the country. Due to rich resources of coal, it is one of
the few power surplus states of the country. The state is one of the leading
producers of Tussar and Kosa Silk in the country. An Apparel park is being
established in a huge area of 4 hectares near Raipur. The state government has
extended many investor friendly benefits – it will reimburse 50% of the amount
spent on new and existing Micro, Small, Medium, Large industries and Mega
projects established by the entrepreneurs, subject to conditions. Exemption is
also given on entry tax and land acquisition/ leasing to eligible Manufacturers
and MSMEs. There is a subsidy on loan interest and benefit on Quality
certification and Patent registration as well. Not only will the state provide
exemption/ concession on allotment of land in industrial parks, but, also a
full exemption on electricity duty for the first many years. For complete
details one must visit https://industries.cg.gov.in/pdf/policy2014-19/Industrial%20Policy%202014-19%20Translated%2012Feb2016.pdf.
According to DIPP, Gujarat is
the second preferred investment destination in India. One of the most developed
states industrially, Gujarat has a world class infrastructure with 42 ports and
19 airports. Gujarat is the largest
denim producer in India and third in the world. The state government has
introduced a textile policy with various schemes to provide assistance in the
form of Interest subsidy, power tariff and VAT exemption. The government
provides great support both in acquisition and upgradation. There is a lot of
government interest in technical textiles. Assistance is provided for energy
conservation, water conservation and environmental compliance to manufacturing
units. Rent assistance/ shed on rent and assistance for building dormitories
for workers is provided. The state Government also provides for 50% of the
worker wages per month, for a period of 5 years, as payroll assistance to new
enterprises. It may be wise to go to https://ic.gujarat.gov.in/documents/news/17-10-2017-14-08-23gujarat-garment-apparel-policy-20172-new-17102017.pdf
Employment is the key to transforming a community. State Governments have now realized the enormous potential of the Apparel sector to create jobs and empower women. They have been quick to take action and create an investor friendly policy direction and environment to entice those interested in striking or spreading roots on their soil. This presents a rare opportunity for MSME Entrepreneurs to set up or expand their manufacturing facility.
Know more about ATUFS (Amended Technology Upgradation Scheme)
(AN ARTICLE WRITTEN FOR CHAIRMAN, AEPC FOR ET RISE)
ATUFS
(Amended Technology Upgradation Scheme)provides invaluable
support to an Apparel manufacturer and exporter in upgrading his production
technology to an international benchmark and / or scaling up to meet increased
order requirements.
Appropriate technological access and a suitable scale of production
are important for any garment manufacturer to achieve and maintain a
competitive edge in global businesses. Use of updated and internationally
benchmarked technology assures world class production quality, which is now
unavoidable to be able to stay in export business. There are amazing
advancements being made in Apparel manufacturing tech and many of these can
have very positive benefits for your business endeavour.
With Apparel 4.0 around the corner, modern tools like 3 D
printing, laser cutting of garments and robots are increasingly making their
way into the production shop floors.
The most obvious advantages of investing in technology
include speed, quality, innovation and efficiency which in turn lead to an edge
over competition and promote expansion. With ‘speed to market’, product
diversification, safety and sustainability being the buying mantras of Apparel
brands these days, exploiting these advantages is certainly the best way
forward.
One cannot keep his eyes closed to such rapid development and
therefore, investment in technology becomes a necessary evil. It may benefit
all export houses, whether big or small, to earmark an annual fund for
technology up-gradation in their yearly budgets- All businesses must
continually be reinvesting in themselves if they choose to grow. Having said
this, stagnation is anyway not an option- either you grow or you die!
New technology does not come cheap! The costs involved can be
huge- not only in monetary terms, but, also in terms of the cannibalising
effect they can have on some legacy operations. While you may be forced to
reconsider your existing business model or your employees may have to be jerked
out of their comfort zones to relearn and reorient their approach towards work,
the effort will bear sweet fruit very soon.
Over the past few years, the government has been very
supportive of infusing new technology into the Apparel manufacturing sector.
Schemes have been made and improved continually to assist all manufacturers,
especially the Medium and Small Scale Enterprises in making wise investments.
ATUFS (Amended Technology Upgradation Scheme) was envisaged, as early as 2009,
by the Ministry of Textiles as a vehicle for growth in scale and modern
development of the textile and garment industry, expected to have a successive
positive impact on the entire value chain. ATUFS provides one time capital
subsidy on investment in labour intensive segments and Garment manufacturing
and Design studios fall into this category. A subsidy of upto Rs.20 to 30 crores
can be availed under this scheme by enterprises. ATUFS is implemented across
two broad categories, wherein, the garment manufacturing sector has been given
a clear preferential advantage. For apparel/ garment and technical textiles
subsectors, a subsidy of upto 15% is provided on capital investment, subject to
a ceiling of Rs. 30 crores over five years, whereas, for other subsectors, the
subsidy is upto 10% with a ceiling of Rs. 20 crores. Therefore, the government
has certainly done its bit for the Apparel manufacturers.
The scheme has been modified several times to improve its
ease of adoption by businesses. The most recent amendment, as recent as in
August 2018, is available on http://texmin.nic.in/sites/default/files/revised_atufs_guideline_02082018.pdf . It is
important for a manufacturer to refer to the latest scheme, in its complete
detail to avail the benefits seamlessly.
While the scheme has been improving continually, the last
amendment has improved the ease of application and reimbursement of funds
drastically. There are many easy to adopt factors of the scheme, which include
the following-
An indicative list of machine manufacturers is given for the
benefit of the subscriber
Permission to avail benefits of state government schemes in
addition to ATUFS
Not only the mainstream machines, but also machines used for
accessories and sampling are included under the scheme
Every year on April 1, the specifications of technology
included under the scheme are prescribed in advance
The scheme is credit linked, which implies that the capital
investment subsidy shall be available on term loan from a notified lending
agency, with minimum 50% of the total eligible machinery cost. The CIS will be
released in full in one go upon successful installation of the machinery.
The
applicant may submit their application online through http://www.itufstxcindia.gov.in/Login.aspx?ReturnUrl=%2f . The government has
ensured a seamless, transparent, digital procedure to avail the scheme and its
benefits.
“Magic
and new technology have always walked hand in hand”- I truly believe in these
words of David Copperfield and am sure you will agree no less! Apparel is the
driver of the entire textile value chain and any positive movement in this
industry automatically drives an upward movement through the entire supply
chain, from farm to fibre to fabric.
(AN ARTICLE WRITTEN FOR CHAIRMAN, AEPC FOR ET RISE)
Product innovation, rather
than process innovation may be a great starter for small enterprises setting
their first footstep into garment exports. Product Innovation in Fashion is
today an intersection of statistics, technology, trends, material, and
aesthetics rather than a mere outcome of trends and preferences.
Shoppers
today have become very mindful of conscious consumerism. There is a clear
interest among the consumers now, towards consuming everything, including
clothing, with responsibility. Brands and in turn, manufacturers, cannot afford
to ignore this and must work to provide convenient solutions within these new
parameters. As a result, Circularity, Sustainability and Traceability are fast
becoming the guiding principles of innovating and manufacturing clothing. It is
not necessarily about what you make, a lot of times it is about how you make,
that now matters!
This
is more easily said than done- However, it may be wise to embark on your
journey in the correct direction right at start, albeit slow! Businesses which
adopt this ideology, when small, will find it far easier to grow into them than
those which attempt the transition at a mature age. For an established
organization, while the finances involved will certainly be steep, the
challenge to transition work habits of those involved will probably be steeper!
Having
set these as the principles of manufacturing, there are many other elements
that should be given due significance in product innovation. The primary
factors that should drive Product innovation in apparel, in my opinion, may be
listed as below-
Your target market- Identify the specific
country you intend to export to and are manufacturing/designing for. It may
help to know that the top Ready Made Garments (RMG) export destinations for
India are the United States followed by United Arab Emirates, United Kingdom,
Germany, Spain and France (not considering European Union as a single
destination). While India’s share in imports of these countries has more or
less been rising, except UAE, over the past few years, Netherlands and Italy
also have been very welcoming for India made RMG. What may be of deeper
interest to MSMEs are the markets of Denmark, Japan, Australia, Republic of
Tanzania or Mexico- countries which hold huge potential for the Indian Ready
Made Garment ( RMG) manufacturer and exporter. There may be more merit in
reaching out to these new lands and striking roots here.
The Ministry of Commerce,
Government of India, has been tirelessly working to support the industry with a
favourable international environment for trade and business. India has a
Comprehensive Economic Partnership Agreement (CEPA) with Japan which provides
exporters with zero duty access in Japanese markets. The India-Singapore
Comprehensive Economic Cooperation Agreement (CECA) gives a similar
favourable positioning to Indian RMG imports in Singapore. Korea, Chile and
Malaysia are also very suitable lands for MSMEs and beginners to explore in the
backdrop of their trade agreements with India. Among the many advantages of
exporting to these countries, the foremost is the landing price advantage for
Buyers in buying Indian garments and the consequent preference for India as a
sourcing destination.
A detailed understanding of
your Buyer and End- User in the target market is imperative. The preferences of
your user in terms of garment circularity( cradle to cradle), silhouette,
material, colour, surface and finish should be analysed well- A first hand
market survey and few international trend forecast agencies may be able to
assist you in decoding these preferences.
Your competition- It may be wise to know your competition well and the edge
other manufacturing nations have over yours- the landing duties or benefits for
goods from your country vis a vis other exporting countries like Bangladesh,
Vietnam, Sri Lanka etc and the latest trade statistics between the nations. In
recent times, certain product categories have been vacated by China and this
has presented a huge opportunity for India to strengthen its foothold as an
exporter. Tracking such international movements in global market and exploiting
suitable opportunities can impact your business very positively.
Scope of continued business growth– A research into the scope of growth within the product
category you are exploring will also be very beneficial. Apparel Export
Promotion Council can provide great support in this decision making through
reliable market reports and statistics. The product categories in which India
has a significant presence on the global export market, along with their
HS(Harmonized System) codes, include the
following:
610910
T-Shirts Etc Of Cotton
610990
T-Shirts Etc Of Other
Textile Materials
620520
Mens Or Boys Shirts Of
Cotton
611120
Babies’ Garments Etc Of
Cotton
620640
Blouses, Shirts Etc Of
Man-Made Fibres
620630
Blouses, Shirts And
Shirts-Blouses Of Cotton
620443
Dresses Of Synthetic
Fibres
620442
Dresses Of Cotton
620342
Trousers Bib And Brace
Overalls Breeches And Shorts Of Cotton For Mens And Boys
Your strengths– Make what your people can
make- An honest assessment of the materials and skills available helps make
wise choices in curating the product basket you can offer to your Buyer. While
this is in no way an attempt to discourage experimentation, it is an advice to
exercise one’s intelligence and business acumen before entering a product. It
is no news to anyone in this domain, that Indian manufacturers have always
enjoyed a strong position in production of cotton spring- summer garments over
manmade fabric autumn- winter wear- a decision more driven by availability and
cost of raw materials and skill experience of labour than by market
demand.
Marks and Spencer, the leading global apparel
brand is one of our most important buyers. During one of our recent conversations
over coffee, said Nidhi Dua, Country Manager (Sourcing), Marks & Spencer
India Pvt Ltd.,“ Product innovation is a continuous process and is
key to gaining competitive advantage and creating value for the
customers. Product innovation can be used to enhance the functionality,
performance and appearance of a product, as well as improving cost viability or
making it more environmentally friendly. Innovation helps companies to
differentiate their product from others in the market, thereby winning the
hearts of the customers and building a strong foundation for growth and
profitability.”
Conducted a two day workshop on Design process and Responsible sustainable design in Fashion with faculty, Masters and undergrad students of Delhi University. What an experience!
