Bangalore: Four months after it announced an incentive-laden policy to attract new investments from textile firms, the Karnataka government has been unable to attract even a single proposal. The state’s textile department blames this weak response to the ongoing economic slowdown.
The state government had hoped to attract around Rs10,000 crore of investments in new textile facilities that would create around 500,000 skilled jobs in the next five years. The state government has offered to provide financial aid of Rs500 crore for effective implementation of the policy. The Karnataka textile policy came at a time when the textile sector is crippled, with many factories shutting down across the state and export orders dropping.
Status quo: A worker at a textile manufacturing unit. Karnataka expected Rs10,000 crore in investments in this sector. Santosh Verma / Bloomberg
Though the exact numbers for Karnataka are not available, India exported textiles worth Rs87,330 crore in 2007-08, as per the Confederation of Indian Textile Industry. Overall textile exports in 2007-08 were around $20.5 billion (Rs99,630 crore) and failed to reach the $25 billion target set by the government. Silk exports alone have fallen from Rs3,000 crore in 2007 to Rs2,500 crore last year.
“The policy offers various incentives for investors both outside the state and the ones who are already here. But we have hardly received any positive response from any big textile firm so far because of the cash crunch and recession. Unless we get the investments, how do we create the target number of jobs?” said A. Anand, joint director of the state’s department of handlooms and textiles. Anand said the only textile firm that’s currently in talks with the state government is Bombay Rayon Fashions Ltd, which proposes to set up 10 units in 10 locations across Karnataka.
The Mumbai-based firm, which has a unit in the 137- acre Doddaballapur apparel park, had recently announced that it would spend Rs1,100 crore to expand its garment capacity in Maharashtra. Mint tried to contact Bombay Rayon through email and on the phone, but was unsuccessful.
Gokaldas Exports Ltd, India’s largest garment exporter, said that no company is right now in a mood to expand. The Karnataka textile policy comes at a bad time for the Indian textile industry. Rajendra Hinduja, managing director of Gokaldas Exports, said, “We have (put the) brakes to all expansion plans, including our textile special economic zone in Bangalore. The market ahead is difficult and most of us are just focusing on churning out our existing turnover. It’s unfortunate that the policy has come at such an hour.”
The Karnataka textile department is aggressively trying to promote the policy among investors by hosting seminars in other states, said Anand. Some of the incentives that the policy?promises?to?investors?are in?cheap?land,?stamp?duty?reimbursement, waste disposal facilities and subsidised power.
But there are also issues that have been overlooked in the policy, said Hinduja. “The earlier H.D. Kumaraswamy government had approved many of the labour issues that we had demanded. Surprisingly, when the textile policy came in after the new BJP (Bharatiya Janata Party) government came to power, none of these issues were included in it,” he said. Some of the issues that companies such as Gokaldas have been demanding are increase in over-time work hours and provision of seasonal or casual labourers.
For example, these firms say workers who are allowed to work for 25 hours a month as overtime should be allowed 50 hours, instead. Also, textile firms have been asking for contract labourers as there is an acute shortage of skilled labourers in the state.
Besides the slowdown, Karnataka has been losing out to competitive states such as Maharashtra, Gujarat and individual textile hubs such as Gurgaon in Haryana and Tirupur in Tamil Nadu, said textile analysts and industry insiders. “In the last few years, outside investments in Karnataka have reduced and many big textile companies are choosing investor-friendly states such as Maharashtra for their expansion,” said Prashant Agarwal, textile analyst and vice-president in Technopak Advisors Pvt. Ltd, a management consulting firm.
Aditya Himatsingka, executive director of Himatsingka Seide Ltd, a leading exporter of home furnishings, said the demand slowdown that began in exports has also percolated into the domestic textiles market. “It’s only a wait-and-watch period for us. Who would want to invest now?”