Date:13/10/2004 URL: http://www.thehindubusinessline.com/2004/10/13/stories/2004101300910400.htm

Back Three-pronged plan to boost textiles, clothing industry

G. Srinivasan

New Delhi , Oct. 12

THE Ministry of Textiles has drawn up a three-pronged strategy covering fiscal, investment and level-playing measures to bolster the indigenous textile and clothing industry to face the competition once the current quota regime in global trade in textiles and clothing is scrapped by the end of this year.

Disclosing this to Business Line here in an interview, the Secretary (Textiles), Mr Wajahat Habibullah, said that the first is by tax incentives, reflected in the Union Budget 2004-05 when the option of Cenvat (Central value-added tax) chain except to manmade fibres was extended to the whole of the textile industry.

Though the Technology Upgradation Fund Scheme (TUFs) had been in vogue, it was not being fully utilised because of tax disincentives and quota systems and so on, he said adding "now that the quota system is set to go, we are persuading the people to invest in the industry so as to be able to compete".

Mr Habibullah contends that "unless we have economies of scale and unless we are cost-effective, we are not going to be able to compete and hence the thrust for being cost-effective through fiscal incentives and economies of scale through heavy investments by upgrading the technology."

He said that investment in textile industry across the board has increased.

The third is to "work with the Ministry of Commerce and External Affairs to see that there is a level playing field abroad," he said, illustrating how the world's biggest textile exporter — the US supplies raw materials to chosen partners and gets the finished products from them, giving preferential treatment and subsidising their own textile industry through backdoor.

"We are aware all of this and taking it up with the US Congress with the Ministry of External Affairs trying to overcome this".

Mr Habibullah underscored the importance of exporting quality textiles and clothing. "We have schemes such as Apparel Export Processing and Export Centre (AEPEC) and Textile Centre Infrastructure Development Scheme (TCIDS) which had not made much headway.''

But, the effort is to try and push these schemes further as they entail developing consolidated areas with common facilities so that the unit cost of operating units from these areas would drastically come down, improving the competitiveness of the industry.

He said that though the Textile Ministry has set apart Rs 17 crore for AEPEC, he expects private parties and the State governments to pick up the balance cost.

Asked about the discriminatory tax treatment to manmade fibre industry and the resultant distortions it creates among the organised textile mills using manmade fibres, Mr Habibullah said, "We have also received representations. We are working with the Ministry of Commerce and Finance to see that any discrepancy that may be or disharmony that may be, are now addressed in the next Budget".

Further, he said that he had met the National Manufacturing Competitiveness Council (NMCC) Chairman, Mr V. Krishnamurthy, and discussed how the Ministry of Commerce and Finance could homogenise the entire thing so that no person feels left out.

On the progress in the revival package for the holding company i.e. National Textile Corporation (NTC) mills, he said, "We are tying to see how to modernise even revivable mills as all their equipment is completely outdated. As it is a question of modernisation and how do we do that, it is left to a Group of Ministers to find a solution."

The second important Government-controlled National Jute Manufactures Corporation (NJMC) mills were, as per the order of the Board for Industrial and Financial Reconstruction, for liquidation and this had gone into appeal by the workers.

The Government is examining the possibility of reviving some of the mills.

Unlike NTC textile mills, the equipment with jute mills are `very good' and in order to identify such mills, a Committee has been set up which would go to West Bengal and Bihar.

Finally, as Indian textile products traditionally dominated for centuries as the most-prized ones for quality in Persia and Central Asia, this was lost during the colonial past even as the country could still boast of skilled artisans, he said.

"Now we will address the issue of handloom weaving industry which despite a number of schemes has not been delivering. This is the cutting edge and a large section of our population is involved in this industry. As the handloom industry is not being run the way the industry should be running with handlooms being highly exploited by a group of people, how to make handloom profitable is going to be a focus," Mr Habibullah said.