Since the National Government has aggressively been promoting employment generation as the major agenda for economic growth along with the ‘Make in India’ slogan, the apparel industry has become a focus sector for State Governments. While 2016 saw two very upfront garment incentive policies from the State of Odisha and Jharkhand, this year saw the Telangana Textile and Apparel Incentive Scheme 2017. Earlier on, policies from Gujarat, Karnataka, Tamil Nadu and Maharashtra were amended to meet the evolving needs of the garment industry, so as to attract investments in the sector. So, what are the incentives and are they enough to attract investment, is a question that many are asking. Apparel Online takes a closer look at the three recent states to enter the fray and how they plan out.
The first to come up with a specific policy for the garment industry, Odisha is the home of a strong worker base that forms the backbone of many successful textile/garmenting hubs in India, including Surat, Bangalore and Chennai. Jharkhand too has a thriving worker population that is more popular in Delhi-NCR region with 40-50% of work force in the NCR coming from this state. On the other hand, Telangana, is an established spinning hub, but has not really forward integrated into garments with its yarns being used by many of the garmenting and knitting hubs pan India. Now, all three states are wooing companies with incentives and industry-friendly policies in the hope of becoming the next big destination for garment manufacturing.
Odisha: Having the basics in place
Bhubaneswar is a clean and green city with all the amenities that justify its position as the capital city of a state on the growth curve. Being endowed with abundant natural resources, the state boasts of a strong disciplined and trainable worker base of both men and women who are culturally open to migrate for better employment opportunities. The state also boasts of many training centres for the apparel industry under the Skill India and Integrated Skill Development Programs, and since the exposure to the apparel manufacturing industry is widespread with large migration already happening, the synergy is obvious.
Under a thrust agenda to develop manufacturing in the state, five industries are the focus areas for development: textile and apparel is one of them. In fact, one of the main purposes for setting up the Odisha Industrial Infrastructure Development Corporation (IDCO) is to ensure that the right infrastructure is established to support excellence for apparel manufacturing. The state is interspersed with numerous ports, an international airport in the capital, good road and train connectivity, huge land bank owned by the Government and good and cheap supply of electricity. Incentive subsidy has been declared for apparel units under Odisha Apparel Policy 2016, the first such policy ever announced by any state. The financial incentives include Rs. 1,500 per worker per month for 36 months, if 90% workers are domicile of Odisha and the unit employs a minimum of 200 workers.
Major garment companies – Shahi, Madura, Jockey (Page Apparels) Texport Industries, have already invested in the city and Color Lines has promised to invest. The area that is being promoted and developed as a fashion and apparel park – Ramdaspur, is on the outskirts, nearly 25 km from Bhubaneswar. Other areas earmarked for apparel parks include Bhadrak Apparel Park, and integrated parks at Bhubaneswar, Balasore, Bargarh, Cuttack, Ganjam and KBK districts. For setting up a unit in the apparel park, the Government has committed to a capital grant of 20% of project cost up to Rs. 20 crore and an interest-free loan up to 10%, with maximum limit of Rs. 10 crore.
A Centre of Excellence is being developed at Bhubaneswar to take up activities such as R&D, skill development curriculum, technical services and consultancy, incubation, publication of industry journals, testing and evaluation of textiles. In association with NIFT, the centre will forecast fashion trends in the Textile sectors, help organize workshops, work with designers of the handloom clusters and provide mentoring support from industry experts. The state would utilize the Central Government Scheme for promotion of research – setting up of revolving funds for providing assistance to entrepreneurs for R&D.
Jharkhand: Offering wage subsidies way ahead of what other states are offering
In a bid to attract the garment industry which is facing cost crunch, the State Government of Jharkhand has committed through a policy decision to give an employment generation subsidy of Rs. 5,000 for every employed person for seven years plus Rs. 1,000 for ESI/PF, and in the case of women and Scheduled Castes, it’s Rs. 6,000 plus Rs. 1,000; so practically it works out to Rs. 6,500 per person, per month for seven years. In tangible form, this translates into an average wage bill effectively coming down by 50-60% from currently 28%-30% to 13%-15%.
And that is not the only benefit that Jharkhand is offering… The state ranks at No. 3 in Ease of Doing Business owing to recent Governance reforms; amended labour laws have done away with ‘inspector raj’ allowing for Single joint inspection and Single annual return for 14 labour laws under Self-Certification Scheme. Besides this, the state has a single window system with single login and time bound approvals. Incentives on various heads that relate to setting up of business are also available, including 7% interest subsidy and 20% capital subsidy on a cap of Rs. 50 crore. Among one of the attractive incentives is a 50% reimbursement of power tariff for 7 years from the date of the release of electricity connection along with 100% electricity duty exemption for 7 years, which translates to around Rs. 2.5 per unit to get uninterrupted power supply, against the typical Rs. 12-14 per unit in NCR with 60% consistent grid supply, balance through private power generation.
In addition, capital Ranchi is well connected to major cities with 8-10 direct flights, within flight time of 1 hr. 30 min. duration, it is equally well connected by railways and road for quick movement of goods, with nearest seaport in Kolkata, a mere 400 kilometres away. Additional port services are available in Haldia and Pradeep. Having a long history of industrialization, with Jamshedpur still considered as the most industrial city in the country, the state has a proven track record of industrial peace with no major lockouts in decades, unlike adjoining Bihar.
Orient Craft has set up a small pilot project that spans 25,000 sq. ft. at Irba unit. A bigger unit is coming up in Hotwar at the proposed 25-acre industrial park. The factory there would be spread over 4 lakh sq. ft. area and will gradually expand depending on space. The Irba unit has given jobs to 900 youths but the plan is to create 12,000 to 15,000 jobs in Jharkhand.
Telangana: The latest state to join the race
In August this year, the young state of Telangana, which is known for its production of long staple cotton, with an annual production of about 60 lakh bales, announced through a Government Order (GO) capital and operational incentives for the textiles and apparels industry to encourage investment in the state. The objective of the move is to encourage investments in downstream processing activities focusing on spinning, weaving, knitting, processing and garment manufacturing including made-ups within the state.
In addition to encouraging new units, the incentives are also aimed at supporting the existing units for their modernization and expansion as well as marketing and promotion activities, hence the incentives are applicable for both new as well as existing units for the next five years. There is also provision for customised incentives for companies that invest Rs. 200 crore or above or/are capable to provide more than 1,000 jobs.
A capital subsidy of 25 per cent will be provided for conventional textile units and 35 per cent for technical ones involved in production of medical textiles, geotextiles, agrotextiles and protective clothing, among others. Special provisions have been made for the energy, water and environmental conservation infrastructure. Assistance of up to 40% of cost of equipment with a ceiling limit of Rs. 50 lakhs under each category of investors separately has been provided for. For Common Effluent Treatment Plant, assistance of 50% of project cost up to Rs. 10 crore at cluster level/industrial parks and up to 70% with a cap of Rs. 2 crore for handloom clusters has been defined.
Since the primary objective is to attract investments and generate employment opportunities for the local population, the Government has been very clear on its intent. “If it is brought to the notice of the Government that the workers are not being adequately compensated, or are exploited, then it shall have the right to terminate the approvals granted and recover the monetary value of the incentives accorded till then,” the GO warns.
Further, incentives include operational assistance of up to 75 per cent towards interest rates, against loans availed for establishment of these units over a period of eight years. Power subsidy ranging from Rs. 1-2 per unit is also being offered depending on the size of each industry up to five years. The Government is committed to reimburse 100 per cent of stamp duty paid for land purchase or lease. Further, GST collected on end-product within the value chain will be reimbursed 100 per cent for a period of seven years from the date of commencement of commercial production, or up to realization of 100 per cent fixed capital investment – the eligible fixed capital investment, whichever is earlier. Existing units which undergo expansion/modernization/diversification will be entitled to get similar benefits under this clause.
Towards infrastructure support, the Government will allot land with rebate up to 50% on land cost for major industries or 25% rental subsidy on built-up space owned by TSIIC for MSME units. Subsidies will be provided on industrial water supply, environmental conservation infrastructure, and infrastructure like roads, power and water. Under Telangana State Skills Development Mission, the Government will provide subsidies towards capacity building and skill development support to facilitate reputed institutions involved in textiles-related training programmes to set up their permanent centres in the state.
Though names are yet to be disclosed, the State Government claims that as many as 14 textile companies have signed MoUs with them to set up their units in the proposed mega textile park in the state. The agreements envisage an investment of over Rs. 3,000 crore, which will provide direct employment to more than 20,000 people and indirect employment to about 40,000 people.
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