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Business Commentary/ Darryl D'Monte

Textile industry needs a policy that can revive other sectors too

In the current phase of political uncertainty, with public attention on the realignments taking place, it will be a grave mistake if the Bharatiya Janata Party-led caretaker government introduces a new textile policy, as it has promised to do.

This is not some business-as-usual affair, or a policy enunciated to meet an international treaty deadline. It will determine the economic future of literally millions of people and thereby deserves to be spelled out only by a government which has the people's mandate to do so, not by an interim arrangement.

Today, when it is widely believed that the time of this industry has passed, it is important to remember that textiles as a whole is India's single largest industry, comprising both the organised and decentralised sectors, accounting for roughly a fifth of the total industrial production.

After agriculture, it is the largest employer, providing jobs for 21 million people, if one adds those engaged in related industries like textile machinery, manufacture of dyes and chemicals, marketing and transport, not to mention the millions of cotton growers.

At the end of the Seventies, when the industry was at its peak, textile mills accounted for 15 per cent of the jobs in the nation's organised sector, only slightly less than the share of food products. The cotton textile industry, which was by far the biggest component, was also ranked second in terms of value added by industry -- ten per cent -- after chemicals. It also fetches one-third of the total export earnings, valued at $9 billion in the mid-Nineties, and is also the highest net foreign exchange earner because of the limited import intensity.

India has 2.9 per cent of the world trade in textiles, as against just 0.6 per cent of global trade in all commodities.

Official estimates in 1995 put the second rung of the industry, the powerloom sector, as employing 6.6 million people, while industry believes it is closer to eight million. Assuming that in 1991, powerlooms employed four million, this accounts for a fifth of all wage-labour in industry and a third in the informal sector.

By comparison, all factories together employed 8.7 million that year. Powerlooms at that stage produced two-thirds of the total production, while integrated mills accounted for less than one-seventh the total.

Similarly, in 1995-96, powerlooms accounted for 58 per cent of the total export of cotton cloth.

Assuming that nearly the entire production of non-cotton cloth and cotton garments came from powerlooms, nearly 90 per cent of the cloth exported directly or indirectly from the country was from this sector.

Experts point out that success in the world market is a better test of competitiveness than performance in a regulated market and by this standard, powerlooms have succeeded remarkably.

While the traditional antagonism is between the composite mill and powerloom industry, handlooms are generally dismissed as a Gandhian relic.

An official census in 1987-88 estimated that there were between two and 2.5 million weavers directly working on handlooms and another one million engaged in related activities. Weavers' organisations estimate the figure is ten times higher, at 20 million, working on three million handlooms and an equal number engaged in pre- and post-weaving operations.

This is an exaggeration because those directly employed would be equal to the total number of jobs in the textile sector as whole. However, there would have been an undercount in the official census, since most handlooms are in the household, and hence the figure will be somewhere between ten and 15 million.

The real challenge to the Indian textile industry will loom as 2004 draws near. This is when the Multi Fibre Arrangement (MFA) will be phased out, after the General Agreement on Trade and Tariffs to this effect in Marrakesh, Morocco, in 1994.

While industrial countries will no longer impose quotas on import of textiles from Indian and other developing nations, the latter's markets will now be open to textiles produced in other countries. Even though India's exports have risen in recent years, they remain abysmally low for what was the world's market leader a couple of centuries ago.

The World Trade Organisation Annual Report for 1997 shows India's share of world textile exports in 1996 at 2.9 per cent and of apparel at 2.6 per cent. Corresponding figures for China in 1996 were 8.1 per cent and 15.3 per cent. After Hong Kong's integration, China's share has jumped to nearly 30 per cent. Even smaller countries like Turkey and Thailand enjoy greater shares than India.

India depends largely on the US and European markets, which absorb 68 per cent of the total apparel exports. According to experts, India's unique advantages have been nullified by "low productivity, obsolete technology, particularly in weaving and processing, high cost of capital, rigidities in labour markets, cascading taxes, complicated procedures for the import of duty-free raw materials and transportation bottlenecks".

India has about the largest area under cotton in the world but produced only 266 kg per hectare in 1998, as against 1,500 kg in Israel, 800 kg in China and 571 kg in Pakistan. It has the largest number of looms in the world and the second largest number of spindles, but their productivity is well below world standards. China has five times as many shuttleless looms and even Pakistan 20 per cent more. Two-thirds of India's fabric exports are of grey cloth; the processing is done elsewhere. It is competitive only in eight or nine items based on cotton and viscose, mainly for summer or casual ware, in the lower and medium price ranges.

Given the magnitude of the industry and the cataclysmic changes that might occur with a new policy, such as those introduced by Rajiv Gandhi in 1985, it is imperative that the government wait till the elections.

The Union Textiles Minister, Kashi Ram Rana, hails from Surat, which is one of the country's biggest powerloom cities (along with Bhiwandi outside Bombay). He no doubt is anxious to protect the interests of several powerloom unit owners, whose support is crucial for his political career. But the lives of millions of people in all three sectors of the industry, along with those in khadi production, as well as cotton farmers, cannot be jeopardised for some short-term political gain.

Apart from the future of the industry, there is the past to be taken care of too. This is in the legacy of the mills belonging to the National Textile Corporation, which have accumulated losses of Rs 60 billion now.

According to Rana, 40 of the 119 such mills could be revitalised by selling land belonging to the rest; 24 of them are in Bombay, where land prices are some of the highest in the world. He commends the Ahmedabad model, where some 15 mills were under liquidation when a scheme was drafted for them six years ago.

He believes that this formula, under which workers were terminated by paying them a month's salary for every year of service (put in), plus 25 days' wages for every year of remaining service, was accepted by the Union.

However, the Textile Labour Association, with its seemingly Gandhian garb, is considered pliant and subservient to managements. By contrast, the Girni Kamgar Sangharsh Samiti, an independent and militant union in Bombay which has been fighting the corrupt, representative, Congress-run RMMS, will not agree to such sops.

Only recently, workers in Mukesh Mills, in Colaba, at the southernmost tip of the island city, received Rs 600,000 each as their terminal dues. The Ahmedabad formula seeks to develop nearly 400 mill plots for industrial uses and another 200 for commercial purposes, generating nearly Rs 840 million at prices prevailing in 1993.

However, it would be far better to conceive of a holistic plan for the mills in any city -- Bombay, Ahmedabad or Kanpur -- in the manner that Charles Correa as well as other Bombay architects have done.

Instead of treating mills as so much real estate, their potential to revive certain sectors, predominantly spinning, should be safeguarded. What happens to the nationalised mills ought to be adopted for the sick private mills as well. This is an opportunity both for industrial and urban revival which may never present itself again.

Darry D'Monte

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