The textile industry is one of the most important pillars of the Indian economy. It contributes about 4% to the GDP, and 17% to the country’s export earnings. It provides direct employment to over 35 million people (Ministry of Textiles).
The main subgroups within the textile sector are readymade garments and cotton textiles. At the central level, various kinds of incentives and concessions are given to the industry either directly or through various schemes. A number of schemes like the Technology Upgradation Fund Scheme (TUFS) and Scheme for Integrated Textiles Parks (SITP) have been implemented by the government to provide extra stimulus to the textile sector. At the same time, incentives are offered by states as well. These vary from state to state.
The textile industry is scattered across the country. Some states and areas specialize in certain products of textile and some in others. The share in the sector is highly uneven among states. Some states like Maharashtra, Gujarat and Punjab have a relatively higher share, whereas states like Bihar and Madhya Pradesh do not have well- developed markets.
In order to improve and increase their investment, states provide various incentives. Some states have specific policies for the textile sector as well. For example, Gujarat, Karnataka, Tamil Nadu, Punjab and Andhra Pradesh have specific state-level policies for their textile industry. Incentives under these policies and other factors like raw material supply and local markets make some states favorable for some sectors of textile and some for others.
Karnataka has apt climate for investment in the textile industry. If well-developed urban markets are not required, then Karnataka provides substantial benefits as it gives large incentives for setting up industries or making investments in its backward areas. Karnataka under its Textile Policy of 2008-13 has planned to get investment worth Rs 9000 crore. Forty percent of such investments are planned to be directed towards the garment industry.
The Karnataka government will establish fashion hubs and assist in market development and brand building. Specific incentives are also provided, like entry tax reimbursement, stamp duty reimbursement, up to 25% waiver on land acquisition charges, subsidy on power and capacity building support. Special support on case-to-case basis will be provided to mega projects, that is, those investing more than Rs 100 crore and employing more than 500 people. Also, required human resource development and skill upgradation would be done to assist the industry. This will be done by upgrading and developing training and development centers.
Gujarat’s textile policy provides incentives that are more favorable for large textile units. It provides 25% capital subsidy on purchase of machineries. Custom duty on textile machinery is only 5%. Also, various human resource development activities for the textile industry has been initiated by state government. Subsidy at 50% of R&D expenditure is provided to industries carrying out research. Interest subsidy at 3% is provided for capital equipment for five years. Assistance is also provided for infrastructural development, market promotion and environment protection. Gujarat is also the largest producer and exporter of cotton, the production of which has been increasing over time. So raw material is plentiful. It is the largest producer of denim. Surat is a strong base for synthetic fibers and provides a big market.
For the wool industry, Punjab is the most suited. It has 40% share of the total wool industry. At the same time, Rajasthan is the largest producer of wool, so wool procurement does not have substantial transportation costs, which processors or traders in other states might have. Under its Textile Policy, it has raised the capital ceiling limit to Rs 1 crore under TUFS. It sanctioned Rs 4,074 crore in 2006-07 under TUFS. Fifty to 100% electricity duty has been waived for textile units. No departmental charges are incurred on using canal water. Punjab also had the lowest closure–operating mill ratio, which signals towards a conducive climate. It has experienced high growth rate in cotton production over the years and so can be the potential destination for the cotton industry.
Andhra Pradesh’s Textile and Apparel Promotion Policy 2005-10 provides for special incentives too. It is more suited for medium-sized entrepreneurs. Labor laws have been relaxed considerably and working hours been increased. Conversion fee for textiles units is waived in the state. Up to 100% of reimbursement of stamp duty, transfer duty and registration fee is allowed. A special incentive of power tariff of up to Re 1 per unit is provided to textile units. Facilities like single-window clearance, captive power generation using natural gas and land for housing needs of workers are also being provided under its textile policy. Specific incentives are provided for mega projects.
Factors other than concessions and incentives, like raw material availability, markets, transportation facilities and cost, affect investments and investment decisions. For example, the jute industry is mainly concentrated in West Bengal due to the raw material availability factor. States like Tamil Nadu and Maharashtra do have a large share in textiles, but do not give significant incentives to new investors. Thus, the textile industry is scattered all across the country even though certain areas and states are more conducive for investments.
written by Milgauss , March 01, 2011
written by minesh agarwal, August 09, 2010
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