The Hindu Business Line : Policy mix vital for apparel sector: Study

IN the current post-quota regime governing global trade in textiles and clothing, the domestic apparel sector must be nurtured through a judicious mix of policy interventions.

This is important now because in the current free trade regime, the growth is expected to be higher, but the increased supply will lead to lower prices and hence major reductions in margins for all players in the supply chain. This is the principal conclusion of a study by a former Joint Secretary, Ministry of Textiles, Mr Krishan Kumar Jalan.

In a theme paper on `Apparel exports — issues and concerns' he authored in the Indian Institute of Public Administration (IIPA) here, Mr Jalan said the period ahead is likely to be harsh to small players who survived due to quota holdings till date. There is hence a need to integrate such small and medium enterprises into the mainstream and make them competent to either become a niche player or an ancillary unit.

Mr Jalan said the power of giant retailers is on the ascendant, thus making the apparel exports a part of a buyer-driven supply chain. The top 10 retailers of the world are likely to control more than 25 per cent of the trade. Stating that India has the right milieu to enhance its share, he said this would be feasible provided the exporter firms do not suffer from lack of a level-playing field due to differences in the import tariffs due to regional trading agreements (RTAs), pegging of currency giving an advantage of about 30-40 per cent or by existence of hidden and not-so-hidden subsidies in the markets of the competitors.

He said the Government needs to help the industry to find raw materials at competitive rates and the best quality possible. The existing Technology Mission on Cotton must be beefed up to develop high-yielding varieties for rain-fed and irrigation areas, drought and pest resistance and pest management technologies. Alongside, contract farming or corporate farming should also be allowed to develop models of farms with higher productivity per hectare.

There is need to continue the Technology Upgradation Fund Scheme for attracting more investment to the sector, Mr Jalan said. He added that more proactive approach was required to bring improvements in this sub-sector such as identification of possible foreign investors, identifying relocation possibilities of efficient foreign manufacturing units and encouraging them to invest in India. Pointing out that the refunding of duties remains crucial to the apparel sector, Mr Jalan cautioned that "any sudden decrease or decrease beyond what is expected causes immense harm to the industry." Any downward revision in drawback rates should preferably be with a prior notice. Besides, a system should be evolved to refund the State or municipal duties/taxes such as State VAT, entry tax, octroi, electricity duty, cross subsidy amount as is charged by hiking the electricity rates. Further, the refunds to exporters should be time bound and there should be a system of Grievance Commissioner whose decision should be binding on the Government.

Taking into account the ground realities and the facet of globalisation, Mr Jalan said there is a need for a special all-encompassing labour legislation and if this is not possible, contract labour should be allowed in the apparel sector as has been done in China, Bangladesh and Sri Lanka by permitting fixed term contracts for workers. The employer should be allowed to adjust its workforce due to structural and other changes and intra-enterprise or inter-enterprise job transfers should be facilitated. Some State governments such as Andhra Pradesh, Madhya Pradesh and Maharashtra have taken a step in this regard, he said, adding that the Ministry of Textiles and industry bodies should liaison with the States to get such initiatives taken by other States.

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