State textiles: An ensemble of policies

Themuch-awaited National Textiles Policy may be announced in another few weeks bythe Union textiles ministry. Now is a good time to take a look at what variousstate textiles policies currently offer the textiles and apparel industry. Theobjective of this exercise is to see how these individual policies are placed,and stress on the need for the new national policy to work hand in hand withwhat the respective states bring to the table. Subir Ghosh writes.

In a few weeks from now, possiblyduring the Budget session of Parliament, the new National Textiles Policy (NTP)may be announced by the Union ministry of textiles. The textiles and apparelindustry has been waiting eagerly for the new policy document, which willreplace the existing one of 2000, and hopefully provide industry with amuch-needed boost. The 2000 policy is hopelessly outdated, given three majorinternational developments: the phase-out of the Multi Fibre Agreement, theemergence of China especially in the field of textiles and apparel, and the2008 global financial crisis. The world has changed considerably since 2000.

In the meantime, however, a numberof Indian states have developed their own textile policies in a bid to boostindustry, as well as attract investments. Each of these policies are specificto the respective states, and are obviously meant to reflect their ownrealities, compulsions and aspirations. All of them have their own positive andnegative points, and in some ways are autonomous too. As and when NTP 2016 isannounced and comes into play, it will be laying out a new framework andprovide directions for a new course

The policy also provides additional subsidies for units within designated textile parks, to those falling under SC/ST categories (20 per cent on the value of fixed assets or Rs20 lakh, whichever is less), and also those under the ambit of disabilities, ex-servicemen, women's categories, etc. The quantum of incentives ranges from 20 per cent of the fixed assets for micro, small and medium enterprises (MSME) projects in the maximum investment bracket of Rs10 crore. The state is also more contemporary in a way by having technical textiles in mind, providing another 10 per cent credit-linked capital subsidy on the value of plant and machinery or Rs25 lakh, whichever is less. Besides, there is an additional 20 per cent on the value of plant and machinery installed to promote cleaner and environment friendly technologies or Rs20 lakh, whichever is less. In order to facilitate entrepreneurship, interest subsidy is provided to entrepreneurs for investments up to Rs99 crore.

Andhra Pradesh followed a similar path in 2015. The state started providing capital subsidy to standalone garmenting and apparel units under its Textile and Apparel Policy 2015-20. The state provides capital subsidy up to Rs10 crore. For the purposes of calculation of incentives under the policy, the gross fixed capital investment is defined as investment in factory building, infrastructure (other than land and land development), plant & machinery and other productive assets with transportation, erection & electrification. These units are not eligible for tax incentives like VAT/CST/SGST concessions. Capital subsidy is provided to all eligible units, during the policy period for expansion/diversification under five categories, including MSMEs, which are projects with a maximum investment of Rs10 crore.

Maharashtra's Textile Policy 2011-17 provides a 10 per cent capital subsidy scheme for new textile projects in Vidarbha, Marathwada and North Maharashtra regions of the state.

Rajasthan has more exemptions, than capital or interest subsidies. It offers exemption from payment of 50 per cent of electricity duty for seven years, exemption from payment of 50 per cent of land tax for seven years, exemption from payment of 50 per cent of mandi fee for seven years, exemption from payment of 50 per cent of stamp duty on purchase or lease of land and construction or improvement on such land, and exemption from payment of 50 per cent of conversion charges payable for change of land use.

Shifting emphasis from the general to the specific

The best way that a state can veer away from the National Textiles Policy, without being at loggerheads with it, is by focusing on specifics, those that would possibly be more in tune either with the state's own set of different policies (in other areas) or even priorities.

Technical textiles were not so big when NTP 2000 was announced, but many states have gone beyond the national policy and announced incentives on their own. Karnataka's document says it clearly: "As a technical textile is one of the major emerging sectors in textile value chain, the Government of Karnataka is putting special thrust on technical textiles sector. Karnataka has the potential to become the global hub for the manufacture of technical textiles and nonwovens, for which there is a huge national and international market." It announced the intention to set up a Centre of Excellence for technical textiles alone that would be supported by the Bombay Textiles Research Association (BTRA) or any leading technical institution of the state.

The Andhra Pradesh policy does not have a special section on technical textiles, but does say that the segment would get the same VAT/CST/SGST concessions. Rajasthan, which enjoys a leading position in production of polyester viscose yarn and synthetic suiting material as well as in processing of low-cost and low-weight fabric, gives a 7 per cent interest subsidy for the technical textiles sector, besides a 50 per cent reimbursement of VAT on purchase of yarn, fibre, recycled fibre yarn, cotton and PET bottles for use in manufacture of goods within the state.

The Karnataka policy acknowledges that consumers are now more aware about environment-friendly goods. It says: "The textile and apparel manufacturers should evaluate each and every stage of the supply chain and production cycle of their products to minimise various environmental hazards posed. They should pay special attention to the selection of dyes and chemicals which are low in formaldehyde content, free from pesticides, heavy metals, etc."

It goes on to say that the policy itself is focused on eco-friendly manufacturing and eco-labelling of products. The state wants to promote eco-friendly fabric and apparel manufacturing projects which conform to specifications laid out as per international benchmarks; and infrastructure facilities within the project may include water supply, biological and chemical effluent treatment plants, alternative electricity supplies, steam and compressed air-all designed to include energy-saving processes. The Karnataka policy also provides additional incentives to companies complying with standards of organic production and processing.

Looking at power and facilities

In Gujarat, enterprises setting up captive power plants of their own are assured of a supply of lignite through a supply agreement with the Gujarat Mineral Development Corporation Limited (GMDC). Moreover, there is a power tariff subsidy @ Rs1 per unit for cotton spinning industries and weaving units. Andhra Pradesh, on the other hand, offers reimbursement of Rs1 per unit for spinning and modern ginning and Rs1.50 per unit for other categories (including technical textiles) for a period of five years from the commencement of commercial production.

Karnataka offers a reimbursement of the cost of power paid @ Rs1 per unit to all value chain activities, including technical textiles. The catch in the case of hi-tech powerloom units, however, is that the power connection should be above 20 hp.

In case of common facilities, Gujarat offers up to 50 per cent (with a maximum ceiling of Rs30 crore) for common infrastructure for cotton spinning parks with or without weaving, but with a maximum ceiling of Rs10 crore for common infrastructure in parks and other textiles activities.

Park developers and park enterprises in Andhra Pradesh are eligible for reimbursement of stamp duty on lease of land required for the new park. This reimbursement is available only once to the developer and the first lessor of an individual unit. Stamp duty reimbursement certificate is issued after approval of the project. Assistance is provided on a case-to-case basis for creation of external infrastructure. This assistance is to be drawn from the industrial infrastructure development fund (IIDF) and/or funding from multilateral agencies.

For establishing common infrastructure facilities, the state provides financial assistance of up to 50 per cent of the expenditure incurred, with a maximum limit of Rs15 crore (Rs30 crore for composite/integrated parks) limited to 10 per cent of the total project cost (excluding the cost of land). Andhra Pradesh also supports setting up of common effluent treatment plants (CETPs) in industrial clusters and textile parks. Moreover, it provides incentives in the form of 50 per cent of the project cost or Rs10 crore, whichever is less; and in the case of the handloom sector, 80 per cent of the project cost or Rs2 crore, whichever is less. There is also an assistance of up to 50 per cent, subject to a maximum amount of Rs50,000 for energy audit, water audit and environmental compliance. The limit of Rs50,000 is for each category and is counted separately.

The common infrastructure sops in Karnataka are spread across two categories: Zone 1 (backward districts with potential) and Zone 2 (relatively developed districts). For the former, it is 40 per cent of the project cost or Rs20 crore, whichever is less; and for the latter, 20 per cent of the project cost or Rs15 crore, whichever is less. But for projects approved under any Central government scheme, the incentive is 10 per cent of the project cost or Rs10 crore, whichever is less. It is pertinent to note that Zone 3 of Karnataka comprising all areas falling in Bangalore Urban district, with the exception of Anekal taluk, are not be provided with any incentives under the state policy.

Rajasthan offers a slew of incentives to textile parks: reimbursement of 50 per cent of amount of VAT paid on purchase of plant and machinery or equipment for seven years, a 50 per cent exemption in electricity duty for seven years, a 50 per cent exemption in entertainment tax, land tax and luxury tax for seven years, a 50 per cent exemption in conversion charges for change of land use, a 50 per cent exemption in stamp duty for purchase or lease of land, and an additional 10 per cent reimbursement of VAT/CST paid for those from women/SC/ST categories.

Talking about overall development

One of the reasons why the state textiles policies of Karnataka and Andhra Pradesh possibly score over others is that they are both comprehensive and holistic.

The Karnataka policy lays down the scheme of things in clear words: "As Karnataka has large cotton growing belts, and number of garmenting units, capturing the value addition, at each stage, from fibre to garment, by fostering related activities within the state, will be the prime focus of this textile policy." This one is essentially a continuation of the earlier textiles policy of 2008-2013, which was called Suvarna Vastra Neethi. It, therefore, goes on to add: "The new policy would continue to follow a dual approach of development i.e. strengthening of existing value chain activities, particularly in spinning, organised and un-organised weaving (powerloom and handloom sector) and processing, for filling the gaps and creating facilities for value chain activities."

On the other hand, the policy in its neighbouring state of Andhra Pradesh articulates its policy objectives thus: "Government of Andhra Pradesh (GoAP) aims to promote and develop a robust textile industry that provides sustainable employment to weavers and posits Andhra Pradesh as a destination of choice to global textile majors. The policy aims to modernise textile manufacturing and improve productivity in order to ensure availability of quality fabric at affordable prices to cater to domestic and international demand."

Andhra Pradesh is equally clear in what it seeks through the policy, in that it even envisages specific targets: make the state one of the most preferred destinations for textile and apparel activities; attract new investments worth Rs6,000 crore by 2020; and create additional employment opportunity for 3 lakh people by 2020 and 5 lakh people by 2025. Definitions are also specified, which range from what a "new enterprise" means to what "expansion or diversification" stand for.

Capacity-building and skill development

The "human" factor is critical to the textiles and apparel industry. Every state acknowledges as much, but obviously vary in how they deal with these issues.

Gujarat, for instance, offers assistance up to 85 per cent (subject to a maximum of Rs3 crore, excluding land costs) for setting up of training institutions. It also provides need-based support towards equipment for the upgradation of facilities in various Industrial Training Institutes (ITIs); and assistance up to 50 per cent (subject to a maximum of Rs20 lakh) for training centres. Moreover, there is a reimbursement of tuition fees to trainees as assistance to the tune of 50 per cent (up to Rs7,000) per trainee per course. There is also a reimbursement of training costs with a maximum of Rs7,000 per trainer per week, as assistance to trainers.

Andhra Pradesh provides considerable assistance to apparel training institutions as well as trainees. Under this scheme, any autonomous institution promoted by government/public sector undertakings or private sector with a substantive background of textile and apparel industries or skilled manpower development is provided assistance up to 75 per cent subject to a maximum amount of Rs4 crore of the project cost. The promoter, however, bears the recurring expenditure of running the training institution.

Training centres that intend to upgrade their facilities in order to provide apparel training are given assistance in the form of 50 per cent of their investment towards purchase of equipment and machinery (including installation costs), electrification and necessary furniture subject to a maximum amount of Rs20 lakh per centre. To be eligible, an institution or training centre is supposed to create a mechanism for assessment of trainees either along the lines of ITIs and polytechnics, or undergo third-party assessments by certified industry bodies.

The assistance to trainees is 50 per cent of total fees charged by institutions approved by the state level committee. This is subject to a limit of Rs 7,500 per trainee for a minimum of 15 working days (120 hours duration) per course in apparel production. The assistance for female trainees is 60 per cent of total fees charged by the institution subject to a limit of Rs8,000 per trainee. Moreover, approved apparel training institutions or centres imparting training to trainers are provided financial assistance, as reimbursement of training cost up to Rs7,500 per trainer, per week. 

The Karnataka policy adds new dimensions to capacity building that usually do not figure in government documents. It offers reimbursement of 50 per cent of the cost of proposed interventions or Rs50 lakh, whichever is less, for market development and branding. The reimbursement percentage is the same or Rs25 lakh for design development and product diversification. It lays emphasis on standards and compliances too: with a reimbursement of 50 per cent of the cost of proposed interventions or Rs5 lakh, whichever is less.

A purely cursory look at the various textiles policies of states in India is telling in one way: any national textiles policy needs to be comprehensive, holistic, and yes, inclusive too.

It is not without reason that everyone has been waiting for the National Textiles Policy. Depending on how elaborate it is in terms of initiatives or guidelines, the respective state policies may possibly have to undertake some course correction measures so as to work in unison. Moreover, with the Goods and Services Tax (GST) still not being a reality, the taxes front (both in terms of exemptions as well as possible new ones) remains a bit murky. The clouds of uncertainty will begin to clear only once the National Textiles Policy comes into being.

PS: A sort of disclaimer is called for. As has been mentioned in the article itself, this is not meant to be a point-by-point enumeration of various aspects of state policies, but to be an over-arching look at the state of things. Most states do not have separate and distinct textiles policies of their own, and only provide incentives through sections in their overall industrial policies.