Gujrat Opportunities Feb2020

Amendments in Gujarat Apparel Policy: Another Feather in the Cap

Gujarat has always been a key state for textile and apparel manufacturing business in India. One of the major reasons behind this is the investor friendly policies in the state and Gujarat government has always been pro-active to address the industry demands. In order to accomplish the vision of farm to fashion, the Gujarat government launched a dedicated policy for apparel manufacturing, Gujarat Garment & Apparel Policy 2017. The policy has fared well since its release and the state has witnessed significant interest from investors. However, during the policy implementation, the investors faced problems in certain areas of the policy and as a result, the government has introduced specific amendments in the policy. It is needless to mention that the amendments have made the policy more investor friendly.

The key amendments are as follows:

• Eligibility criteria under the policy has been reduced to investment in 75 machines & employment generation for 150 workers, which was earlier 150 machines and 300 workers.

Multiple expansions are allowed to avail incentives under the policy that was earlier limited to only one expansion.

Benefits in line with plug & play have been extended directly to investors with 50% assistance in construction of building & shed (excluding land cost) up to Rs. 10 crores per entity. Maximum eligible area per machine will be 150 Square feet.

• Provision of Ramp-up period of 6 months has been introduced to applicants to ensure industry gets maximum benefit of payroll assistance under the policy.

• Investment in Value-addition activities in Garmenting (Washing & Garment processing) has been allowed for interest subsidy under captive production.

It is envisaged that the above amendments will help in attracting more investors and extend the benefits to smaller businesses and budding entrepreneurs. Some of the significant benefits that the industry can enjoy at the helm of recent amendments are as follows:

• The reduction in the eligibility criteria reduced to 75 machines and 150 workers will enable a lot of MSME investors to expand and set-up new units under the policy for which they were earlier ineligible.

• The provision of multiple expansions with reduced eligibility will ease out the pressure of garment investors to set-up large units and recruit the workforce at once. The amended policy gives liberty to set-up a factory with limited capacities and later increase the capacity in a phase wise manner through multiple expansions.

• Gujarat being the denim state of India has plethora of denim garment manufacturers. Manufacturing denim garments requires a lot of processing such as washing, dyeing, and other value-adding processes. The amendment of including value added process for interest subsidy will incentivize denim manufacturers to establish a composite unit with washing, dyeing, etc.

• The extension of plug & play benefits directly to garment investors that was earlier through GIDC will not only reduce the time taken in land identification, tendering, construction and project start but will also provide freedom and flexibility to the investors in deciding the project location as per investor’s assessment. Further, as per the earlier policy, the state government provided incentives of up to 125-130% (over a period of 5 years) of the total capital investment. With this amendment, the returns will increase even further.

• A lot of investors shared their concern in the past that they might not be able to reach the promised level of employment within the stipulated time and hence might lose the employment generation assistance. Hence, the provision of ramp-up period of 6 months will allow such manufacturers to fulfil the condition of employment generation without any fear of losing out on the incentives.

The recent amendments under the policy look promising for the future of garmenting business in Gujarat as the government is trying to build a business ecosystem as well as provide subsidies in line with that offered by other lucrative investment destinations. The recent amendments made under the policy not only highlight the commitment of the state towards building a sustainable industry but also boosts the confidence of investors at the time of an economic slow-down. In conclusion, the government has made a more aggressive stance wooing the garmenting business to Gujarat and is expected to garner significant investments.

Read our blog Investing in Garment Manufacturing in Gujarat: A Golden Opportunity to know how much can a 500 sewing-machine factory benefit by investing in Gujarat.

The article has been authored by Ayushi Puri, Consultant and Abhay Pratap, Associate Consultant.