The Hindu Business Line : Handloom industry

THE handloom sector plays an important role in the country's economy. It is one of the largest economic activities providing direct employment to over 65 lakh persons engaged in weaving and allied activities. As a result of effective financial assistance and implementation of various development and welfare schemes, the sector had been able to withstand competition from the powerloom and mill sectors. Yet, several myths surround the sector. An attempt to dispel some of them.

Myth No. 1: The handloom industry has reached its sunset phase.

The reality today is that the industry is more vibrant and confident of its survival due to its intrinsic strengths and merits. It is the torchbearer of Indian culture and heritage.

It can, therefore, never face extinction as long as the cultural values and heritage are revered and admired anywhere in the world. The industry in the past may have gone into declines from time to time. However, at this point of time, the picture looks nothing but rosy.

Myth No. 2: The handloom industry has not prepared itself to face the post-WTO dispensation.

The Handloom Export Promotion Council (HEPC) is well aware of its role as a catalyst in revitalising the handloom industry in the context of the post-Multi-Fibre Agreement era to cater to the increasing global demand. Realising the need for a proactive approach to augment the export potential of the industry and keep it in a state of preparedness to meet the global challenges in the post-WTO world, the HEPC has formulated a number of strategies for increasing exports.

Myth No. 3: The handloom industry does not have the competitive edge to face global competition.

The HEPC has identified five handloom production clusters to be developed as Handloom Export Zones. A scheme has been formulated and submitted to the Ministry of Textiles for sanction. The scheme aims at upgradation of infrastructure support and skill for handloom weavers, besides strengthening the production base by modernising the looms.

These measures will enable handloom weavers enhance their export competitiveness and improve their earning potential on a sustained basis, thus contributing to better standards of living.

The scheme also envisages the elimination of middlemen by linking the weavers and exporters through frequent buyer-seller meets and increasing the volume of direct and deemed exports.

Myth No. 4: The number of skilled master weavers is dwindling.

A plan for the preservation of skills through the Gurukulam concept has been formulated to stop the migration of children of handloom artisans.

A school of weaving on the pattern of Gurukulam will not only nurture the talents of the `disciples', but will surely create a congenial atmosphere to make them proud of their profession. Through this concept, there will be a continuous transfer of skills from the master craftsman to the trainees. This will augment the available base of skilled workers, besides widening the production base for intricate weaves and reviving the rare weaving methods.

Myth No. 5: The handloom industry can never adopt hi-tech methods in creating designs.

The HEPC is seized of the fact that design adds value and contributes to the saleability of any textile product. Therefore, the HEPC proposes to upgrade the existing CAD design studio into a high-class textile design studio with world-class packages.

It also proposes to use the services of well-known designers. The central studio would be set up at Chennai and linked to satellites proposed at Karur (in Tamil Nadu) , Kannur (Kerala) and Panipat (Haryana). A heritage library would also be set up to preserve exclusive designs such as Kancheepuram silks weaves of Tamil Nadu; Maheshwari and Chanderi designs of Madhya Pradesh; and the ikkats of Andhra Pradesh. The proposal will soon be submitted to the Ministry of Textiles.

Myth No 6: The handloom industry will never master the marketing capability of the organised sector.

The HEPC has embarked upon a project called `Handloom Expo Mart' to give a competitive edge to the exporters. The establishment of an international market will be the right strategy to attract buyers who are increasingly looking up to India as a major sourcing hub for handloom textiles. To provide increasing exposure to handloom products world-wide, the HEPC proposes to intensify its participation in international fairs at regular intervals.

Promotion efforts will be focussed in emerging geographic areas such as Latin America, Africa and the Asean countries. The HEPC will assist exporters in bringing out posters, pamphlets, brochures and also in maintaining Web sites.Myth No. 7: The handloom industry does not possess a brand identity.

The Textile Ministry is taking steps to brand handloom products to prevent duplication by the powerloom industry. The Ministry has also entrusted the textile committee to develop a handloom mark for the industry in the lines of wool mark and silk mark.

Besides giving an exclusive touch to the handloom products, these measures will help the handloom products fetch better prices.

Myth No. 8: The handloom industry will never receive the same support as the organised sector from the Central and State governments.

The Centrehas, over the years taken steps to protect the handloom industry. The Handlooms (Reservation of Articles for Production) Act, 1985 was enacted to reserve certain items for the industry. The spinning units are required to produce yarn in hank form to cater to the sector under the Centre's Hank Yarn Obligation Scheme.

The Planning Commission recently constituted a Steering Committee on Handloom to make recommendations and take the industry to a position of strength and provide inputs for policy formulation. In the latest Exim Policy, Madurai, Karur, Kannur and Panipat have been declared towns of excellence in respect of handlooms and a number of fiscal concessions made available.

The government of Tamil Nadu has forwarded suggestions for the development of the handloom sector, which include assistance under house-cum-workshed for weavers, insurance coverage for weavers under Bunker Bhima Yojana Scheme, Deendayal Hathgraha Protsahan Yojana scheme, 10 per cent special rebate scheme, handloom export scheme, hank yarn price subsidy, interest subsidy scheme on working capital, and concessional interest scheme through Nabard.

Yet, handloom exporters do not always get what they deserve from other Central Ministries. A case point is Rule 30 which was introduced to Section 40 (a) (Ia) of the Income-Tax Act last October. By this Rule, if the TDS amount is not deducted, or deducted and not paid within a specific period, the entire contract expenses will be disallowed.

This, in effect, will mean that the entire contract expenses will be taxed at 35 per cent in the case of a partnership firm. Since the Rule was introduced mid-year, many were caught unaware. Only during the assessment, they realised that their tax liability was huge.

In fact, more than 50 per cent of the operations of handloom exporters are contract jobs. In respect of an exporter doing a turnover of, say, Rs 100 lakh, Rs 55.00 lakh would be contract payment. If he has not deducted and paid the TDS amount within the specified date, his liability would be Rs 19.25 lakh.

If the tax on his profit is Rs 3.50 lakh, his total tax liability would be a staggering Rs 22.75 lakh. This is about 23 per cent of his turnover.

The normal tax liability would have been Rs 4.75 lakh. For non-payment of Rs 4.75 lakh, the exporter will have to pay Rs. 22.75 lakhs. The penalty is almost five times the unpaid amount. A small exporter cannot pay a huge sum of Rs 22.75 lakh.

There is a provision to claim these expenses the following year. But this can be done only if he survives in his business. Even if he survives, the following year he will incur heavy losses.

Even a layman can appreciate the untenability of Rule 30. Its enforcement will spell disaster for countless exporters.

The handloom industry, as a whole, is getting a face-lift, thanks to policy-makers at the Centre and in the States, the various councils and associations, and the ever-striving handloom weavers. Indeed, the industry has the unending strength to survive.

(The author is former Chairman, Handloom Export Promotion Council.)