“Lowered incentives have hurt exports

“Lowered incentives have hurt exports"

The decentralised powerloom sector is the backbone of India’s textile business. It not only contributes about 60% to India’s fabrics export, but also provides employment to over seven million people. The Dollar Business caught up with Purushottam K. Vanga, Chairman of Powerloom Development and Export Promotion Council (PDEXCIL), to understand what the Council is doing to boost exports from the sector.

Interview by Anishaa Kumar | October 2017 Issue | The Dollar Business

 

TDB: How has the sector been performing over the last couple of years?

Purushottam Vanga (PV): The powerloom sector produces fabrics like cotton, polyester, rayon, etc, as well as blended fabrics. Although the sector is mostly decentralised, it contributes about 60% to total fabric exports from India. Until the Foreign Trade Policy 2015-2020 modified the schemes and reduced certain incentives, exports from the sector were constantly growing. The current trend isn’t encouraging, but I am hopeful that with the support from the government and intervention by EPCs, sectoral growth will take a positive turn.

TDB: How is Powerloom Development and Export Promotion Council (PDEXCIL) helping its members?

PV: Since 1995, PDEXCIL has been helping its members by conducting seminars and workshops for weavers, small entrepreneurs, etc., to make them aware about various government schemes, the export scenario, etc. The Council also organises activities such as international buyer-seller meets, reverse buyer-seller meets, etc., to encourage small powerloom operators to export. In fact, through these activities, 109 small producers have forayed into exports.

Additionally, the Council helps its members participate in both international and national trade fairs at a highly subsidised rate. Other than that, encouraging members to upgrade their technology, marketing powerloom products and addressing sectorial concerns by taking them up with the concerned authorities are some things that the Council does on a regular basis.

TDB: In April 2017, the government launched PowerTex India scheme. Can you tell us more about the scheme?

PV: The new scheme has combined all the existing schemes under one umbrella and also has some additional components. Some of the prominent schemes are In-Situ Upgradation of Plain Powerlooms; Group Workshed Scheme (GWS); Pradhan Mantri Credit Scheme for Powerloom Weavers; Solar Energy Scheme for Powerlooms (SESP) and facilitation and upgradation of Powerloom Service Centres (PSCs). Through these schemes, the government is assisting small powerloom weavers to grow and is developing this sector as a whole.

TDB: Speaking about the SESP scheme under PowerTex India, to what extent will it ease the burden of power costs?

PV: Not only for the powerloom sector but for most sectors the future lies in renewable energy. The Solar Energy Scheme for Powerlooms (SESP) will help an entrepreneur tackle high power tariff.

The power tariff varies from place to place. For instance, in places like Surat where subsidy on power isn’t available, the scheme is a good solution, but, in the short run it may not make business sense for many other states as there are upfront costs involved. For example, if installation of a solar energy unit costs Rs.20 lakh and the government subsidised the cost by 50%, the weavers still ends up spending Rs.10 lakh. States like Maharashtra already enjoy 50% subsidy on electricity and millers pay only Rs.3 per unit. So, in these states, considering the cost of installation against the per unit cost of power, the scheme does not make business sense. But, in the long run, solar energy will become viable. Shifting to solar power is necessary. We have asked the government to install a few units in Bhiwandi and Sircilla to see if weavers can truly understand how solar energy could be beneficial for them in the future.

TDB: Some time back a delegation from PDEXCIL had raised concerns about the poor condition of the powerloom sector in Maharashtra. Could you share some of the concerns?

PV: Maharashtra has the highest number of powerlooms in the country, roughly 13 lakh powerlooms. They employ about 30 lakh workers, directly and indirectly. As this is an important region, PDEXCIL considered it important to raise the issues with the concerned authorities. Maharashtra has both developed and underdeveloped clusters in terms of infrastructure and technology. For instance, places such as Ichalkaranji and Solapur have come up well in terms of technological development and marketing their products, whereas some important clusters such as Bhiwandi and Malegaon are yet to technologically upgrade and most of the looms there are conventional. PDEXCIL wants the authorities to address these issues and give a fillip to the sector in the region.

Schemes such as In-Situ Upgradation of Plain Powerlooms, Yarn Bank Scheme, etc., are the outcome of the PDEXCIL’s interventions. PDEXCIL is not only working with the government but also making small entrepreneurs aware about the support systems available to them from the government through seminars, road shows, etc.

TDB: Countries like China, Vietnam and Bangladesh are strong competitors in your sector. What must India do to stay ahead in the game?

PV: Cheap labour plays a crucial role in this sector and India, China, Vietnam, Bangladesh, etc. have an abundance of cheap labour. At the moment, India is amongst the top players, but, looking at China’s mammoth share in the global market, it is apparent that there is an enormous opportunity waiting to be exploited. However, we also need to be aware that countries like Vietnam, Indonesia, Cambodia, Thailand and Bangladesh are emerging as well-honed competitors to India.

The availability of raw material has given India an edge over the rest. But, availability of cheap labour and raw material alone will not help us stay competitive. India has to employ state-of-the-art technology with better infrastructure, for the sector to produce better and more competitive products.

Skill development is also very crucial, and I am glad that the government has introduced various schemes such as Pradhan Mantri Kaushal Vikas Yojana, and the Integrated Skill Development Scheme to address this issue.

India has the advantage of a good brand image, something that has been developed over a long period of time. What we now need is technology to leverage this brand image.

"Exports WENT down after the FTP 2015-2020 reduced incentives"

 

TDB: How has GST effected the sector?


PV: Powerloom is a decentralised sector with mostly marginal weavers, and since the conversion of yarn into fabrics is just an interim process, there was no incidence of tax. However, with the implementation of GST this is no longer the case. We also need clarification on a few issues. Earlier cross-border trade with Nepal was considered domestic trade, but we are not sure whether this will be the case under the GST regime. We also don’t know how much tax must be paid for blended fabric as it’s a combination of several fabrics with different tax slabs.

TDB: How do you envisage the future of Indian powerloom sector?

PV: The powerloom sector is the backbone of the textile sector and we are continuously trying to promote the sector, both domestically and internationally. But, there are certain issues that need to be addressed, and these include availability of raw material at reasonable price, better infrastructure, modern technology, social security for our workforce, better marketing of powerloom products at the international level, etc. The sector definitely has a bright future, but we need support from the government in the form of favourable policies.

The present government has been proactively assisting us. And if this kind of commitment continues, India’s share in the international market will scale new heights. The sector produces 56-57% of the fabrics in the country, and the number is growing. But, despite our contribution, people aren’t aware of the sector. With the help of the new schemes, the sector will become more centralised and organised and it will be able to improve its stature in both the domestic and international markets.

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