GST, Chinese Imports Dim Hopes for Surat’s Textile Hub This Diwali

Floods, poor liquidity, poor EXIM policy & negative impact of GST has brought the textile hub in Surat to its knees.

An embroidery worker threads the jari into the needle 

(Photo: Rahul Nair/The Quint)

Video Editor: Ashutosh Bhardwaj

“The government either doesn’t understand us or they simply ignore us,” says a disgruntled Ashok Jeerawala. Jeerawala is the president of the Federation of Gujarat Weaver’s Association in Surat who claims that this year’s Diwali is severely hit by the economy.

Surat, the largest hub for both textiles and diamonds in India, is facing severe recession, as the demand has plummeted. And the Diwali season has not been able to bring in bumper sales like previous years.

There are several reasons that can be attributed to the slowdown in Surat’s textile industry.

“This year since the beginning – from Pongal which comes around 14 January – our business fell by 50 percent, followed by wedding season which again saw a 50 percent drop, followed by Eid, Gauri Ganesh, Durga Puja etc. All festive seasons including Rakhi, Savan even Navratri, everything has been down.”

Ragnath Sarda, President, Federation of Surat Textile Traders Association

The Quint spoke with traders across the city to understand what dims the brightness for this year’s Diwali.

Poor Implementation of EXIM Policy & Poor Liquidity

China continues to be a scourge for the textile industry of Surat as its products are eating away the latter’s market share. According to Ashok Jeerawala, the government did impose a 20 percent anti-dumping duty on Chinese imports, yet China managed to circumvent Indian laws and taxes.

“The Chinese are flooding our markets with their products by directing it through Sri Lanka, Nepal and Bangladesh. How can we compete if Chinese products flood the markets? The tiff between India and China is taking down our business.”

Ashok Jeerawala. President of Federation of Gujarat Weaver’s Association

Another major issue faced by the textile sector is lack of liquidity as payments are delayed by more than 100 days, claims Purshottam Agrawal, Joint Secretary, Federation Of Surat Textile Traders Association.

“Earlier we used to get payments in 60 days. Now the payment is not coming in post 150 days. On several occasions, the trader is returning goods due to his inability to pay for it,” he said.

The floods in UP and Bihar have also affected bills receivable as many retailers in the flood affected districts are finding it difficult to make payments due to lack of funds at their end.

Ragnath Sarda, President of Federation Of Surat Textile Traders Association, said, “We haven’t received payment on the clothes that we sold there earlier, because they are in no position to open showrooms and sell the product. To top it off they have not purchased anything for Diwali.”

GST’s Negative Impact

Its been two years since GST was introduced, but the textile sector still has issues with the tax regime as they claim that it has drastically affected their revenue.

“Before GST in Surat where we consider the Diwali business for 60 days where 50 days of trading happens, which is around Rs 12,000 crores of business including 450 trucks loaded with goods daily. After GST, last year our business came down to Rs 6,000 crore and the number of trucks came down to 275-300. Till last month we saw only 90-100 trucks leave from here. It has increased somewhat but it’s still not enough and we anticipate around 200 trucks leave the market. So all in all, 40 percent of the business loss will be recorded during Diwali.”

“Our revenues are down by 50 percent when compared to last year. When GST was implemented we saw a 25 percent fall but this time the recession has pushed us down to 50 percent,” said Rajesh Agrawal, Treasurer, Federation Of Surat Textile Traders Association.

Ragnath Sarda explained further:

“The traders have appealed to the government to revoke sections of the GST such as Reverse Charge Mechanism and Input Credit, but their pleas have fallen on deaf years.”

“There are several such categories- GSTR-1, GSTR-3, GSTR-9 & 9C along with ITC-04 and RCM. We are flabbergasted with all these and are not able to focus on business. So our appeal to the government is that these categories under GST that are hampering business should be completely taken down,” said Sarda.

Unless the government ensures remedial economic measures Surat’s future is headed towards darkness.