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
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.