Textile cluster-prospect & retrospect

INTRODUCTION:

Clusters are geographic concentrations of interconnected companies and institutions in a particular field. Clusters encompass an array of linked industries and other entities important to competition. They include, for example, suppliers of specialized inputs such as components, machinery, and services, and providers of specialized infrastructure.

Clusters are simply an area, where all units which are producing similar/dissimilar kind of product. Which are related to skills, technologies, or common inputs, suppliers, etc. Finally, many clusters include governmental and other institutions - such as universities, standards-setting agencies, think tanks, vocational training providers, and trade associations - that provide specialized training, education, information, research, and technical support.

In this article an attempt has been made to understand the present position of textile cluster development in India, and its relative advantages and disadvantages.

It is anybody’s guess that the clusters promote both competition and co-operation. Rivals compete intensely to win and retain customers. Competition is the seed of Cluster, without vigorous competition, a cluster will fail. Yet there is also co-operation, much of it vertical, involving companies in related industries and government body and other financial institutions.

Competition can coexist with co-operation because they occur on different dimensions and among different players. If we want to cope up with this competitive edge of the world, we must float a type of programme, where every one in the unit producing own products, at a single place, and their consolidated efforts in arriving at the target only.

With this, we may face global competition jointly, for say achieving the target by-

• Increasing the productivity

• Encouragement, involvement &motivation.

• Feeling of team sprits.

• Ethical business activity, which makes goodwill of company

A cluster also allows companies to operate more productively in sourcing inputs; accessing information, technology, and needed institutions; coordinating with related companies; and measuring and motivating improvement.

The advantage of any cluster more practically with reference to textile may be viewed from customer, producer and supplier angle which is as given below.

With reference to customer:

a. Approachable, easy to find
b. More choice, more variety with reasonable rate.

With reference to producer:
a. Availability of land on reasonable rate.
b. Relaxation in government rules and regulations
c. Availability of good infrastructure
d. Availability of skillful labour, i.e easy to get skillful labour
e. Centralized purchasing
f. Relaxation in tax, for example, in Baddhi situated in Himachal Pradesh near to Chandigarh, government provides relaxation in excise duty.
g. Easy to handle scrap disposal. So that they will get sufficient cost return

With reference to suppliers:

a. Approachable
b. Centralized supplying
c. Proper logistics cycle.
d. More customer
e. Cost saving in transportations
f. Bulk order
g. High consumption

In order to push the reforms government is keen to support the cause-growth and development of textile cluster through the Ministry of Textiles (MOT) and implement the Scheme through Special Purpose Vehicles (SPVs). Industry Associations/Groups would be the main Textile promoters of the Industry. The SPVs shall have operational autonomy so that they do not become surrogate Public Sector, Enterprises or be controlled by Central/State Governments. SISI (small industries service institute) have a plan to promote cluster development in any area of textiles and related field where enough resource and co-operation is available.
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This cluster development programme includes the central as well as state government’s involvement, this is around 80% and contribution of individual company is around 20%. With this object, government also plans some other development programmes for example special economic zone for big (foreign) company, in power Loom Park etc.

Government provide consultancy for the development of cluster programme. By now things have been crystalised is in proper format and soon the results may be visible in Textile Sector.

How it works:

In the development of textile cluster government through agency of initiative groups it discharges following functions.

a. Identifying the related industries in a particular region. Then judge there interest
b .Identifying the locations, on scientific assessment of the demand and potential of the area.
c. Facilitating formation of Special Purpose Vehicles at each project level with the participation of local industry.
d. Preparation of Project Plan including the setting of standards for infrastructure.

e. Structure and appraise the projects and submit the same for consideration of Project Approval Committee (PAC).
f. SPV would be the focal points for implementation of the scheme, playing the following role:

i. The SVP would conceptualize, formulate, and achieve financial closure, implement and manage the infrastructure
ii. The SPV would procure land, cost of which could be built into the project cost.
iii. After developing the infrastructure SVP would allocate sites to industry for setting up units.
iv. SVP would also facilitate securing bank finance required for setting up units in the Textile Park.
v. SVP would be responsible for maintaining utilities and infrastructure created for Textile Park by collecting service and user charges.

With the support of central government and state government ILF & S (Industries Lease Finance & Services) leads this cluster development programme as a main organizer. It provides the following services:

a. Provide technical and managerial consultancy to every units.
b. Make techno-economic surveys.
c. Identify new industrial opportunities.
d. Conduct entrepreneurship development programmes to motivate new entrepreneur.
e. Provide common facility services and vocational training in the workshop.
f. Prepare reports for modernization of selected units.

Role of state government is becoming more important in the development of textile clusters. It is supposed to observe following functions:

a. Providing all the requisite clearances, and motivate & encourage them.
b. providing the necessary assistance for Power, Water and other utilities
c. Assist in identification and procurement of suitable land on reasonable rate
d. The State Government agencies like Infrastructure/Industry Development Corporations may also participate in the projects
e. Provide necessary subsidies to them.
f. Providing flexible and conducive labour environment and consider special facilities like exemption of stamp duty etc. for the units located in cluster.
g. Provide other related schemes for overall effectiveness and efficiency of the project. In order to facilitate proper coordination, State Governments would be requested to participate in the Special Purpose Vehicles.

The Government of India’s (GOI) support under the Scheme by way of Grant or Equity will be limited to 40% of the project cost subject to a ceiling of Rs. 40 crore. This could be given as grant or equity to the SPV. However, the combined equity stake of GOI/State Government/State Industrial Development Corporation, if any, may not exceed 49%.

Whom to approach:

The project proposals shall be considered and sanctioned by a Project Approval Committee (PAC) headed by Secretary (Textiles). The other members of the Committee shall be as follows:

i. Advisor (Industry), Planning Commission
ii. Additional Secretary & Financial Advisor, Ministry of Commerce/ Textiles.
ii. Textile Commissioner, Mumbai
iii. Joint Secretary (PF-II), Department of Expenditure
iv. Joint Secretary (Infrastructure), Department of Commerce
v. Joint Secretary (IIUS), Department of Industrial Policy & Promotion
vi. Economic Advisor, Ministry of Textiles.
viii. Joint Secretary (Exports), Ministry of Textiles – Member Secretary

Textile cluster-Few projections:

Government of India has planed to develop 32 clusters and Indore has got the opportunity to be one to develop ready-made garment cluster named Apparel Park. In Indore have a plan to promote cluster development in ready-made garment sector where around 1500 garment units are working. The Indore readymade garments manufacturers group interested to established and integrated apparel park with world class supporting infrastructure at Indore to compete with the global market at both domestic as well as domestic market. SISI (Small Scale Service Institute) encourage, motivate and promote them to join this growth full program to make Indore city a second Tirpur. It helps to the Indore readymade garments manufacturers group to search and procurement of a suitable land on reasonable rate where every one can easily avail this facility given by the government. It helps in proper development of cluster. In this regard SISI provide Technical and financial assistance.

This all type of facilities will be have world class and at very cheaper cost with help of the grant from the central government.

Proportion of investments:

Under this scheme 25 acre is available for units and remaining land will be used for others facilities.

Entrepreneurs could take any one of this option:

a. 2 acres
b. 1 acres
c. 1/2 acres

This project has duration of 18 month and production will be start on 2007

Details for implementation of this project:

a. First of all procurement of land in the name of company
b. Project will be submitted to the central government for approval and sanction of the grant.
c. After this units will go for tie-up with financial institution
d. With in 18 months building will be handed over along with the complete infrastructure facility to the entrepreneurs
e. Company will negotiate with the plant & machinery suppliers for the best price.
f. Units coming in the park have to install their plant machinery.
g. The expected employment in the plant both direct & indirect will be approx. 8000 people.

Indore being the hub for the Textile thread. It has huge sector of garment, here small, medium and large supplier and producer of textile products are functioning. In ready-made garment sector, raw material (dyed or un-dyed fabric) comes from Gujarat, Maharashtra and Northern India (knitted). The ready-made garment produced is sent to nearby cities and other states for sale.

The fabric used here are of cotton, polyester/cotton blend, polyester and polyester/viscose etc. The design is changed time to time according to fashion for example presently checks and short shirt are in fashion. The cost of the ready-made garment is in the range of 40 rupees to 220 rupees.

Demands of readymade association:

1.Relaxation in registry duty
2.Exemption from sell tax for at least three years.
3.Relaxation in labour law should be provided in Apparel park as like in SEZ.
4.Contribution proportion should be around 10%.
5.Loan interest from financial institution should be 5-6%.

Under the cluster development scheme Ludhiana textiles and hosiery industry is expected to receive Rs 60 crore, with the Centre contributing a majority of the funds and the Infrastructure Leasing & Financial Services (IL&FS) pooling in to implement the project. Ludhiana export knitwear garments are worth about Rs 800 crore at present, and with the establishment of the apparel park, the quality of the goods will improve and exports will pick up. The ancillary units would work as subcontractors.

Besides supplying garments to leading national brands like Wills Lifestyle, Raymond’s, MTV, and Color Plus Pantaloon, Ludhiana is known also for its own brands like Monte Carlo, Duke, Octave, Blue Mont, and Neva Silk cluster

For promoting Fashion the fashion technology park launched in Chandigarh, has a 14 acre integrated park (expected investment of 220crore), located at Mohali, it includes-fashion school, design studios, fashion units, etc

In addition, an apparel park also is being planned in Ludhiana in co-operation with the Apparel Exporters’ Association of Ludhiana (APPEAL) and FEKTAA. The Unido Cluster Development initiative has been to approach several large-scale support institutions and the local government to create the Ludhiana Apparel Park, through a $10-million public-private partnership initiative.

At present Tirupur Apparel Park is ready, there will be nearly 60 knitwear units with 200 ancillary units in this park, which would feed the domestic as well as export markets. While other such projects are in the pipeline in Bangalore and Kanchipuram.

With regard to silk park development a silk Park equipped with all modern facilities in cocoon rearing, reeling, silk weaving and value addition facilities is fast coming up at Zakura near here to give boost to traditional silk Industry in the state. About 40 silk Industries are being set-up in the park coming up an estimated cost of Rs.8 crore. Over 2000 persons would get direct employment in the silk park.

Similar to the cluster cited above many are going to mushroom in various states all over India, depending on the need base and the interest taken by the respective state government agencies.

As is any other industry textile cluster formation has few drawbacks which are as below.

a. Limited choice to take decision: As per system of cluster we have limited choice about labour because in this environment we must have to pay according to cluster and something more.
i. Skilled labour goes to large/medium scale industry.
ii. Allocation of labour i.e. labour complements
iii. Higher rate of man-power turnover is expected so as per this we can say that, we can’t allocate/pay/recruit labour, as per our requirement unless there is change in labour legislation.

b. Interference of large/medium industries : As per this, small scale industry have to follow same root as large scale follows, in term of “spare parts, transportation system, quality policies ,lead-time structure etc
c. Monopoly: There is chance of monopoly type market to be developed.
d. Generalized booking order: In this, we must have to follow same booking & delivering system, so in case of requirement we can’t change this, as per our need.
e. Chances of over shadow: In cluster, there is difficulty to develop small industry to large scale industry.

Problems to develop cluster:

i. Rare availability of suitable land,
ii. The government wants that contribution of units should be 51% of the total investment but units are agreed for only up to around 30%.
iii. Perception of business man to change one unit to other place.
iv. Chance of loosing suppliers & customer.
v. Lack of interest to chance our parentally unit to other place.
vi. Nearness to port and rail and road services makes the cluster development a good proposal.
vii. Most of the ready-made garment manufacturers have their parental business and that’s why they do not easily agree to involve others to work as a joint venture.

Conclusion:

From the preceding discussion it is evident that advantage of having textile cluster outweighs the disadvantages. It may be possible to make more beneficial development not only large and medium scale industries but also the small scale industries.

The progress & development of Cluster could happen only with the joint effort of industries and government .It is also advisable to develop schemes for small scale industries. In this regards financial format should be planned in such a way that contribution of small scale unit to a minimum for say less than 30-40%.

For cluster development we should identify suitable, reasonable, approachable land, first, and then invite related units to come together. For the development of such programme wide publicity is inevitable.

It is essential to develop team spirit in the event where huge orders are to be met with.

Acknowledgement:

First of all we would like to express profound gratitude to Prof. Dr. H.V.S.Murthy for giving encouragement and guidance to research on cluster development.

We cordially thanks to Mr. Santosh Das, Asst.Director SISI, Mr. S. Balaraju, Director Regional office of Textile commissioner, Mumbai and Mr. Shantipriya Doshi, Chairman Indore Readymade Garment Manufacturing Association for their precious help and support.

References:

1.WWW.UNIDO.COM
2.WWW.GOV.NIC.IN
3.WWW.TRADE.COM
4.Anon “ 10 apparel parks by next year” ITJ 2005 (72)
5.Anon “ Govt. tailors textile project” ATJ 2005 (17)
6.Anon “ 25 textile parks planned in 2 years” ATJ 2005 (24)
7.Anon “ Big apparel park in Ludhiana in 2 year” ITJ 2005 (103)

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