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BUSINESS:
TEXTILE INDUSTRY
Sew
It Up, It's Never Too Late
One
way to settle the duty anomalies would be to introduce a system of value-added
taxation (vat). "Ideally, the excise duty pattern should be vat-based
in which each link of the value chain (from yarn to garments) is taxed
progressively. That will increase tax revenues without imposing disproportionate
burden on any one activity," says Siddhartha Rajagopal, executive
director of the Cotton Textile Export Promotion Council.
But even
that won't be enough for the textile industry to survive and thrive. The
industry needs a booster dose of new technology, industrial restructuring
and a complete policy reversal to make the most of the opportunities in
the free trade regime. Apart from the big ticket measures like dereservation
of garments and knitting and a workable VRS, the Government will have
to remove certain small regulatory lacunae. For instance, textile mills
are currently not allowed to relocate from high-cost to low-cost areas.
Almost all the old mills located in Mumbai have now become unviable due
to rising costs in the metropolis. Compared to Gujarat, wages in Mumbai
are about 40 per cent higher, power tariff four times higher and water
10 times costlier. Yet Mumbai mills are not allowed to relocate to inexpensive
areas. Reason: fear of job loss. That's unfounded since out of 54 mills
in Mumbai, 12 are closed and the rest are either partially closed or incurring
heavy losses. The employment in these mills has plummeted from 2.5 lakh
in 1980 to 57,000 now.
The Centre's
only concrete policy response to the industry's problems has been the
setting up of a Technology Upgradation Fund (TUF) in April 1999. Under
the scheme, grants are given to looms and mills for modernisation. Though
the offtake from the scheme has picked up in the past six months, it is
not yet a success. That's because the rampant excess capacity has deterred
any fresh investments in the industry. And mills aren't getting any money
from banks and financial institutions. Says Mafatlal: "Lenders aren't
ready to touch any existing textile project."
Nothing
less than a new textile policy is going to stem the rot in the industry.
Such a policy has been in the making at the Centre for four years now.
Union Textiles Minister Kanshi Ram Rana promises to deliver in two months
a policy that "will address and solve most problems of the industry".
(see interview). Even if Rana is able to live up to his words, what he
may offer may be too late. And for it to have any impact, it must not
be too little.
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