Tex­tile Parks: Driv­ing home in­no­va­tions!

The In­dian govern­ment’s Scheme for In­te­grated Tex­tile Parks is just what the ap­parel in­dus­try needs to come out of its slug­gish stu­por. Amit Gug­nani, Se­nior Vice Pres­i­dent for Fash­ion - Tex­tile & Ap­parel and En­gi­neer­ing, Technopak, in­forms us about the u

Apparel - - Contents -

Cur­rently, the In­dian ap­parel in­dus­try does seem to be in the midst of choppy wa­ters; how­ever if mar­ket anal­y­sis for the fu­ture is to be be­lieved, then this is just a pass­ing phase. The In­dian tex­tile in­dus­try is ex­pected to grow at a CAGR of nine per­cent to reach USD 225 bil­lion by 2023. In­dia is also the sec­ond largest ex­porter of Tex­tile and Ap­parel (T&A) world­wide. Within the coun­try, the T&A in­dus­try is the sec­ond largest em­ploy­ment­gen­er­at­ing sec­tor, be­sides which, it ac­counts for four per­cent of In­dia's GDP, makes up 14 per­cent of the in­dus­trial pro­duc­tion, and also brings in 17 per­cent of the coun­try's ex­port rev­enues.

Re­al­is­ing the sig­nif­i­cant con­tri­bu­tion of this in­dus­try to In­dia's econ­omy, the Min­istry of Tex­tiles (MoT) had pro­mul­gated a new and more com­pre­hen­sive Scheme of In­te­grated Tex­tiles Parks (SITP) in 2005. This scheme was for­mu­lated by tak­ing into ac­count the short­com­ings of the ear­lier Ap­parel Parks for Ex­ports Scheme (APES) and the Tex­tile Cen­ter In­fras­truc­tural De­vel­op­ment Scheme (TCIDS) and in­tro­duced new fea­tures, such as, greater promi­nence for in­dus­try man­age­ment and deeper in­volve­ment of State gov­ern­ments. These tex­tile parks do have a lot to of­fer in or­der to build the in­dus­try fur­ther.

HOW IT ALL BE­GAN

The sanc­tion for SITP came through in the 10th Five-Year Plan, in a bid to fi­nance the in­tro­duc­tion of, and in­vest­ment into, glob­ally com­pet­i­tive in­fra­struc­ture in tex­tile units across the in­dus­try, be­sides pro­vid­ing em­ploy­ment op­por­tu­ni­ties and boost­ing pro­duc­tion. The scheme has been pop­u­lar from its in­cep­tion and has been able to pro­vide a great im­pe­tus to the in­dus­try. It has also been able to at­tract For­eign Di­rect In­vest­ment (FDI) into In­dia’s tex­tile sec­tor. Brandix In­dia Ap­parel City, the Tex­tile Park in Visakha­p­at­nam, is an im­por­tant ex­am­ple of a Sri Lankan com­pany in­vest­ing in In­dia to cre­ate world-class in­fra­struc­ture for tex­tiles and ap­parel.

THIS IS HOW IT ROLLS!

The ma­jor ad­van­tage of set­ting up tex­tile parks is that they can in­clude fa­cil­i­ties for spin­ning, weav­ing, siz­ing, tex­tur­is­ing, pro­cess­ing and ap­parel man­u­fac­tur­ing. The Cen­tral Govern­ment of In­dia (GoI) awards a grant of ei­ther 40 per­cent of project cost or R40 crores (USD 7.3 mil­lion), whichever is higher, to cre­ate the nec­es­sary in­fra­struc­ture for the park. The project cost cov­ers as­pects such as ground lev­el­ling, drainages, cre­ation of boundary walls, street light­ing, train­ing in­fra­struc­ture, ad­min­is­tra­tion blocks, ef­flu­ent treat­ment plant, sewage treat­ment plant, etc., depend­ing on the needs of spe­cific parks. The scheme is im­plemeted through a Spe­cial Pur­pose Ve­hi­cle (SPV) for each project. The SPV al­lo­cates the share­hold­ing to all its mem­bers in pro­por­tion with their in­di­vid­ual land hold­ings. Once the park is ap­proved, in­di­vid­ual businesses can be es­tab­lished with­out any is­sues. The MoT also plays an im­por­tant role to en­sure the timely com­ple­tion of the projects and in­ter­venes from time to time, in, for in­stance, fa­cil­i­tat­ing ap­provals from the re­spec­tive State or Cen­tral Govern­ment’s de­part­ments. While the MoT pro­vides a grant of 40 per­cent, as men­tioned above, the SPVs are free to take the bal­ance ei­ther com­pletely as eq­uity or as a com­bi­na­tion of debt and eq­uity or par­tially through State Govern­ment grants, if ap­pli­ca­ble.

A BIG THUMBS UP!

The T&A in­dus­try has ben­e­fited from this scheme in many ways; for one, the scheme has been able to bring to­gether small and large en­ter­prises within a

sin­gle park. The in­di­vid­ual pro­mot­ers are equal share­hold­ers in the park and can there­fore take de­ci­sions in com­mon in­ter­est, more ef­fec­tively. Again, the scheme has proved to be a good start in terms of im­prov­ing size and scale, across the value chain. A third ben­e­fit is that it has been able to cre­ate large-scale em­ploy­ment av­enues. The com­pe­ti­tion within the in­dus­try, along­side the chang­ing con­sumer propo­si­tion, adds to the chal­lenges faced by global re­tail­ers, and ex­erts pres­sure on the over­all tex­tile sup­ply chain. There is com­pe­ti­tion from low­er­cost coun­tries, on the one hand, and from coun­tries which have de­vel­oped large-scale ca­pac­i­ties, on the other. The SITP helps in im­prov­ing over­all com­pet­i­tive­ness via min­imis­ing the cap­i­tal re­quired for in­fra­struc­ture de­vel­op­ment and al­low­ing for tech­nol­ogy up­grades; this has been con­firmed by MoT's eval­u­a­tion. Fur­ther, the scheme has been in­stru­men­tal in ad­dress­ing the prob­lem of frag­men­ta­tion within the in­dus­try by way of build­ing into the tex­tile parks, a ver­ti­cal­ly­in­te­grated value chain. It has been able to re­duce the cost of pro­duc­tion at units lo­cated in­side the tex­tile parks via the shar­ing of com­mon in­fra­struc­ture; has re­duced the time re­quired for the pro­cure­ment of in­puts and made var­i­ous units along the value chain avail­able at one lo­ca­tion, thus, leading to economies of scale as well as at­tract­ing the at­ten­tion of large-scale do­mes­tic and in­ter­na­tional buy­ers. The new parks be­ing planned will also have additional fea­tures like flat­ted fac­to­ries, i.e. with space read­ily avail­able for start­ing a gar­ment fac­tory, and train­ing cen­tres as well as hos­tel fa­cil­i­ties for work­ers. These fea­tures will sig­nif­i­cantly re­duce the time re­quired for start­ing op­er­a­tions. SITP has def­i­nitely emerged as a flag­ship scheme by the MoT to fa­cil­i­tate in­vest­ment and in­crease em­ploy­ment op­por­tu­ni­ties in the T&A sec­tor in In­dia.

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