Sickness in Textile Industry: Causes and Remedies

Textiles is the oldest industry in the country and employs directly and indirectly a large number of people, is linked to a major agricultural crop, earns nearly 25% of export earning and caters to one of the basic needs of the population. The human cost of sickness in this industry therefore is considerable. Four points are worth noting about the nature of sickness in this industry: (i) It is neither temporary or isolated (ii) It is largely afflicting the organised sector (iii) Within the organised sector, the composite mills are suffering more (iv) It is more pervasive in “older textile centres” like Ahmedabad and Bombay Sickness in any industry can be caused by an amalgam of factors. This is true of textiles also. This could be: (i) environmental – macro level policy, aggregate demand problems, etc; (ii) industry specific – technology or product related or regional problems; or (iii) unit specific – management, financial ro industrial relations problem The problems of the composite sector in the older textile centres are predominantly due to structural and environmental factors: (i) Competition from powerloom sector (ii) Unequal competition with the State sector units which are supported by direct and indirect subsidies from the public exchequer. (iii) High incidence of indirect taxes (iv) High locational cost because of State and local government imposts coupled with locational immobility (v) Rationalisation hurdles and exit barriers (vi) Long history of restrictive policies relating to use of fibre, export of yarn, expansion etc; (vii) High and fluctuating cost of raw materials Besides the above structural and environmental factors, it should also be noted that the management suffered from static perceptions about the industry relating to raw material, technology products and markets. These perceptions were conditioned by the general environment of a closed and highly protective economy. This led to a problem of slow response to market changes at the unit management level. Many of these problems were identified and accepted by the Expert Committee on Textiles and found expression in the new Textile Policy announced in June, 1985. However, the implementation of the same has been halting and partial. As a result the problems continue and with the passage of time, malady becomes deeper. Lately, there appears to be a greater desire to implement the new Textile Policy with some more vigour. Synthetic fibre duties have been brought down, export of yarn has been given a boost, some modification in the unrealistic conditions for rehabilitation relief for workers from the national fund has been introduced, etc. Still further macro level remedial steps have to be taken. The major ones being: (i) Retirement of unviable capacity through partial or full closure with a suitable scheme for taking care of the human problem (ii) Evolving a rational labour policy relating to wages, employment and modernisation (iii) Restoring equality of competition between various sectors by removing direct and indirect subsidies, etc. (iv) Locational cost disadvantages should either be neutralised or the industry allowed to shift (v) Cost of modernistion to be brought down thorough a change in the rate of interest and duties on machinery (vi) Ensuring reasonable and stable raw material prices through price stabilisation operated by C.C.I. (vii) A dynamic programme to achieve international competitiveness and thrust for exports At the unit level, managerial actions will have to be taken in the following areas: (i) A clear view of the turn-around strategy by relating product strengths to market movements (ii) Tight-fisted control on costs and productivity. Tough minded approach to labour productivity. (iii) Market diversification through exports and tapping of the readymade garment market While the unit implements such a strategy in the new environment, support will have to be provided to the sick unit till it becomes healthy on the following conditions: (i) It should be determined that the unit has a good plant, has demonstrated technical ability to achieve reasonable levels of productivity and produce good products. A good management team and work culture also is important. (ii) The relief should be by way of financial accommodation i.e. by deferment of loans, interest, taxes and other statutory dues. Financial restructuring and cost relief may also be necessary in some cases. (iii) A quick unbiased and clear-cut evaluation of the Management should be made. Management commitment must be ensured. Promoter’s contribution only should not be taken as an indicator of commitment but other factors like background and history of the Management should also be used. In other words, judgement has to be made on the viability of the unit, commitment and competence of the management, and the need for funds and financial accommodation. Although in the final plan, these three have to be integrated, the evaluation has to be made separately for each of these areas. This requires expert judgement. Time also is of essence in such assistance. Institutional framework exists. Banks, financial institutions, State Government, BIFR are involved in rehabilitation. Coordination has improved. However, some gaps in communication between institutions and some grey areas like interim support exist.