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No consensus yet on freeing knitting sector from SSI ambit

G. Gurumurthy

COIMBATORE, May 20

THE debate whether knitting industry should go out of the small scale industries (SSI) nomenclature or not is growing loud.

But while the cluster-based knitting industry in Tirupur is for the status quo, the Government and the office of the Textile Commissioner (TC) favour dereserving knits from SSI.

The Textile Commissioner, Mr B.C. Khatua, who managed to convince the Ludhiana-based knit industry to go out of SSI reservation, had to do lot of talking on the subject with the members of the diverse cotton knitting industry in Tirupur.

At the end of the nearly two-and-half-hour discussion with a cross-section of Tirupur knitting industry, the only breakthrough Mr Khatua could attain was that he made Tirupur knitwear cluster deliberate the issue on a wider plank.

Tirupur knitwear manufacturers comprising knitted fabric producers, knitted fabric processors and garmenting industries represented under different banners informed the TC that they would take up an internal debate within Tirupur industry on the pros and cons of giving up SSI status till next month-end and come to a finality. They wanted Mr Khatua to put on hold the issue till then.

The stand of the Tirupur knitwear industry has not surprised the Textile Commissioner given their strong opposition to the idea of removing the SSI reservation for knits as was done some time ago for the woven industry.

TC's suggestion to split the knit industry into two - knitting industry and knitwear producing industry - to facilitate dereservation has also not found favour with Tirupur cluster as they felt that splitting the industry would debilitate the very health of Tirupur cluster, which thrived in segmented yet integrated production culture.

The TC in his meeting with the Tirupur knitters justified the Government's thinking in dereserving knitting on the plea that knitted fabric production, unlike garmenting, calls for high degree integration in terms of achieving the quality parameters and economic scale of operation.

This in turn requires huge investments. The grievances being aired now within the domestic knitwear industry that they need to outsource quality knitted fabrics through imports are clear pointers that this sector required huge investment.

But knit sector will be able to attract investment only if it is dereserved from SSI, Mr Khatua maintained.

This has made the Government strike a midpath by retaining knitted garmenting under SSI and allowing knitting fabric production outside the SSI.

At present India, according to Mr Khatua, is unable to export its knitted fabrics to full potential, despite rise in its share in the world trade in knits. This is because India is unable to achieve the quality parameters in knits due to investment restr iction in the knitwear sector where knitted fabric and processing would add synergy but require huge investment.

With widening application/use of knits especially in areas like home fabrics, the country require more investment into this sector.

Mr Khatua's argument to open up the knitting and processing sector to larger investment has drawn strength from the perspective that at present the Indian knitted garment sector consumed higher amount of yarn and dyes; but value realisation of the knits is hardly Rs 4-5 band per kg. ``So, the domestic knitting industry is very much a stake-holder in dereserving the industry,'' he added.

But the fear expressed by the Tirupur industry on dereservation is that opening up the knits to foreign direct investments (FDI) would wipe out the local entrepreneurs, besides threatening the local employment.

However, to allay this fear, the TC maintains that Tirupur industry could always seek some mechanism from the Government in the form of capping the investment limit for knitwear.

Similarly, the apprehensions nurtured by some in the industry about knits attracting excise duty with the sector being opened to higher investment would be too flimsy a ground to deny larger benefits for the textile economy.