T&A Industry Seeks Financial Relief And Export Incentives To Surmount Challenging Conditions

Faced with headwinds, the domestic textiles and apparel (T&A) sector has demanded an urgent financial relief package as also export incentives in order to bail the industry out of the current difficult situation, which has aggravated following the imposition of 50 per cent tariff by the US. The industry firmly believes that failing to do so will lead to bank loans of large number of T&A units in various parts of the country becoming NPAs.

As part of the financial relief measures, a joint memorandum submitted recently by the textile industry associations and export promotion councils to the Union Finance Minister has urged for extending two years moratorium for the repayment of principal amount. Moreover, the industry is also demanding extending 30 per cent collateral free loan under ECLGS with 5 per cent interest subvention, similar to the one extended during Covid, both for MSMEs and larger companies.

“The stagnation in the export growth during the last 12 years has already led around 25 per cent of the new capacities, created under various state and Central Government polices/schemes, becoming excess, thereby causing financial stress. The high US tariff has only aggravated the situation. As the stocks have started piling and new orders are hard to come by, the textile industry is finding it extremely difficult to service debts. Extending two years of moratorium and policy initiatives of Central government will prevent the units becoming NPAs and help manage the grave crisis,” says Durai Palanisamy, Chairman, Southern India Mills Association (SIMA).

The industry believes that a credit infusion of 30 per cent under ECLGS should be immediately considered for the exporters hit hard by the new US tariffs. The higher import duty erodes export margins significantly, especially for MSMEs and mid-size players with tight working capital cycles. The collateral free financial help from banks and financial institutions will go a long way in helping the exporters in their market diversification process, which will reduce dependency on the US market.

As part of export incentives, the industry has urged the ministry for extending the 20 per cent Focus Market Incentive Scheme for the US exports. The India textile goods now suffer a distinct tariff disadvantage of 30-31 per cent in the US market vis-à-vis its major competing countries like Bangladesh, Vietnam, Sri Lanka, Cambodia and Indonesia.

“Though in the long run, India will certainly explore other export markets, immediate direct fiscal support is essential to retain the existing customers and prevent several lakhs of workers becoming jobless. There is an urgent need to reintroduce the erstwhile Focus Market Scheme Trade Policy of the Department of Commerce and incentives given at the rate 20 per cent of the FOB value of exports made from 27th August 2025 (date of the US Tariff implementation). This incentive can be in the form of transferable duty credit scrip so that there is no impact for the exchequer as the duty credit utilisation will be spread over a reasonable period,” says an industry representative.

Moreover the industry has sought extension of the period of RoDTEP and RoSCTL schemes. The existing RoDTEP scheme was valid till September 30, 2025 and RoSCTL scheme is valid till March 31, 2026. These schemes were introduced to refund the blocked/embedded duties and taxes as per the recommendations of the committee constituted for the purpose. “It is essential to extend both the schemes till 2030 to avoid export taxes and sustain global competitiveness,” states an industry player.

Moreover, the industry has also asked for enhancing the value cap for duty drawback, RoDTEP and RoSCTL, since most of the goods need higher value cap to enhance global competitiveness. The enhanced value cap would encourage and support the value added exports. Further, it has also been urged to increase the RoDTEP rates by 2-3 per cent  for all products. The Annual RoDTEP Returns (ARR) and data submitted by the industry indicate that there is a scope for increasing the rates. This would also rectify the anomaly in fashion bedding falling under HSN 9404 and other items.

While seeking export incentives, industry associations and export promotion councils have demanded the re-introduction of the Interest Equalisation Scheme (IES) for pre- and post-shipment rupee export credit as also extension of 5 per cent benefit for all categories of exports without cap. Justifying the demand, the industry says that the cost of capital in India is abnormally high. Interest rates range from 8 to 12 per cent, depending upon the risk profile of borrowers.

In order to ensure global competitiveness, the interest equalisation scheme was introduced, but the scheme expired on December 31, 2024. In this changed scenario, there is an urgent need to reintroduce the IES on pre- and post-shipment rupee export credit for the next five years and the rates under IES needs to be increased to 5 per cent without value cap for all categories of exporters to fully serve the purpose of the scheme, explains an expert.

Meanwhile, the Confederation of Indian Textile Industry (CITI) has said the country’s textile and apparel sector will put its best foot forward to ensure that the benefits of the recently announced GST reforms reach the end customer.

“At the Confederation of Indian Textile Industry, we have always believed that businesses must imbibe the spirit of an economic reform and not merely follow the letter. The same holds true regarding the landmark GST reforms,” said Ashwin Chandran, Chairman, CITI, while commenting on the GST reforms which came into effect on September 22, 2025.

“CITI members and the entire textile sector stand committed to ensuring that the GST benefits reach the end customer as for us the interests of the customer always come first,” Chandran added.

The CITI chairman said that the textile and apparel items priced up to Rs 2,500 being charged a 5 per cent GST, starting September 22, would make these products more affordable for common people and drive consumption upward. Earlier, only textile and apparel products priced up to Rs 1,000 were charged 5 per cent GST rate.

“We have no doubt that our industry will benefit in a major way from the game-changing GST reforms, for which we would like to reiterate our heartfelt gratitude to the Prime Minister, Finance Minister, Textiles Minister, GST Council, and all concerned officials,” stated Chandran.

To benefit the textile and apparel sector, the GST changes announced have eliminated duty inversion to ease cash flow and working capital, ensured fibre neutrality with man-made fibre having the same GST rate as cotton, and eased registration and compliance procedures to benefit small businesses.

Chandran said the improvement in the ease of doing business, courtesy the GST reforms, could play a vital role in making India’s textile and apparel companies becoming more productive and competitive. “The GST reforms were just the sort of impetus the textile and apparel sector needed at a time when the industry is grappling with a grave crisis in the form of the high US tariff which has put at considerable risk our exports to the world’s no.1 economy,” the CITI Chairman added.