As the textile sector anticipates the Union Budget, there are several key recommendations aimed at enhancing the industry’s viability and competitiveness. One of the primary concerns is the high cost of raw materials in India, which are significantly higher than global prices. This is largely due to the implementation of Quality Control Orders (QCOs) on man-made fibers (MMF) and yarn, creating non-tariff barriers that restrict the free flow of essential raw materials. As a result, the industry faces shortages of specialized yarns and fibers, which drives up local prices. To address this, the Centre should consider liberalizing import policies, reducing or eliminating customs duties on MMF fibers and vital chemicals used in production, which will lead to a more competitive market.

Additionally, the current Production-Linked Incentive (PLI) scheme applies only to synthetic fibers. To better support the textile and garment sectors, it is recommended that the PLI be extended across the entire industry. This expansion would help attract more investment in the sector. Furthermore, the government should reinstate the Technology Upgradation Fund Scheme (TUFS), which previously provided subsidies for new machinery but was discontinued.

The cotton procurement scheme under the Minimum Support Price (MSP) should also be restructured. A shift towards a Direct Benefit Transfer (DBT) program would offer more liquidity to cotton farmers, allowing them to sell their produce without delays caused by official procurement. In addition, to mitigate price volatility, the creation of a Cotton Price Stabilisation Fund is crucial to ensuring the availability of raw materials at competitive prices. Extending the credit limit period for cotton procurement to eight months (instead of three) and introducing an interest subvention scheme could help address these issues effectively.

Lastly, the industry calls for the deferment of Section 43B(h) of the Income Tax Act, 1961. This provision, which mandates that payments not received within 45 days from a company will be considered part of its business income and taxed in the current financial year, has posed challenges to the textile value chain. Given the varying credit periods across production stages, often exceeding 45 days, the rule has disrupted production planning. It is suggested that this law be deferred and later reintroduced in phases to allow the industry sufficient time to adapt to its implications.