Will The New Maharashtra Textile Policy Make Vidarbha A Textile Hub?

Economy

Will The New Maharashtra Textile Policy Make Vidarbha A Textile Hub?

While Gujarat government has extended its textile policy for another five years, Maharashtra government is in the process of redrafting its textile policy for 2017-22. The intended aim of the earlier textile policy, which expired in March 2017, was to attract investments in the state, especially in the Vidarbha region, and the government was hopeful of achieving investments worth Rs 40,000 crore, and creating 11 lakh jobs. However, from 2012-17, investments have been far short of the goal, and Vidarbha is nowhere near to being a textile manufacturing hub of Maharashtra.

According to state government estimates, investments in the total textile projects approved by financial institutions and in various phases of enforcement by March 2017 amount to Rs 16,371 crore, with the potential to generate 2.50 lakh jobs. Inaction on part of the government, lack of response from investors, poor infrastructure and connectivity in the regions where investments were to be attracted, are the factors responsible for the shortfall. For instance, in 2015, to avail of the subsidies and benefits under its textile policy, the state government made it mandatory to have textile hubs concentrated in the cotton growing belt of Vidarbha and Marathwada, as opposed to western Maharashtra, to cut down on the cost of transporting raw cotton. However, the region lacks other supporting infrastructure. With the result that just 25-30% of the raw cotton is processed in the state, not much different from when there was no Maharashtra textile policy.

A comparison of IEMs implemented in Gujarat and Maharashtra during 2014-15, reveals that Gujarat recorded implementation of 19 textile projects, while in Maharashtra, no textile project was started during the year. In 2013-14, Gujarat received 20 textile projects, while Maharashtra got three.

Just a handful of big names such as Raymond, Siyarams, Suryalakshmi Mills and some others have moved to Vidarbha region to set up manufacturing facilities. Some are public-private initiatives. Around 30 textile units of varying sizes have come up in the region during the textile policy period. The state boasts of 16 textile parks that have generated employment for 23000 people. Another nine textile parks have been announced by the state government. However, textile parks have not really been successful in pushing up production and employment, with controversies surrounding many such parks.

Most of the textile investments over the last few years have been going to Gujarat and Tamil Nadu. Surprisingly, Maharashtra government has begun inviting inputs from industry and government departments when less than five months are left of the current financial year. State officials say the policy will be announced soon, but that is to be seen, given the experience of the last textile policy.

Maharashtra government plans to set up 9 textile parks

The state government has announced plans to set up nine textile parks in continued efforts to attract textile investments to add value to cotton grown in northern Maharashtra.

The government has taken many initiatives such as reducing the number of permissions required to set up industries in the state, cutting down bureaucracy, in a bid to help entrepreneurs focus on doing business. But Gujarat offers much more to the textile industry.

In January this year, the Maharashtra government announced plans to set up a garment park with an investment of Rs 300 crore at Solapur. The park is expected to generate employment for over 60,000 workers. The aim is to make the park a hub for uniform manufacturing. At present, Solapur has over 1000 garment making units stitching uniforms worth Rs 1000 crore, and employs over 60,000 workers. However, after the January announcement, there has been no further news on progress of the park.

Also in January, the government announced the setting up of a textile park in Sayane near Malegaon. The Maharashtra Industrial Development Corporation's regional office has acquired 113 hectares of land for the proposed textile park. At the time, it was believed that basic infrastructure such as roads, water, electricity will be available within the next one year, after which textile units will be allotted plots in the park. However, progress has been sluggish. Similarly, a number of other textile parks at huge costs have been announced on large areas of land, but interest from investors has been lacking.

Even so, the government recently declared that by 2025, Maharashtra will become a US$ 1 trillion economy, with investments mainly in infrastructure, IT, ICT and services sector. The state has attracted more than half of the total FDIs in the country, Maharashtra government claimed. The government is investing in improving infrastructure in its financial capital Mumbai, but again, at a snail's pace.

20 districts to benefit from Nagpur-Mumbai road project

While the state government's trillion dollar economy plan hinges on investments in IT and services sector, one of its projects may help improve profitability of the textile industry in the hinterlands.

The Maharashtra government has evolved an agro-industrial module for development of 20 districts along the Rs 30,000 crore Nagpur-Mumbai Supercommunic-ation Expressway. Apart from constructing the 690-km stretch eight lane roads, the government has drawn up two major plans for development of metros and drought-hit districts. The first would tackle development of four metros - Nagpur, Amravati, Aurangabad, Nashik - as it navigates through three regions of Vidarbha, Marathwada and North Maharashtra. However, the second, more comprehensive developmental model is on agriculture economy for development of backward and drought-hit districts of Akola, Buldhana, Yavatmal, Wardha, Washim, Beed, Latur, Hingoli, Jalna, Nanded, Parbhani, Osmanabad and Nagpur rural. The government believes this project to be a gamechanger for Maharashtra's hinterland.

Maharashtra Chief Minister Devendra Fadnavis, who conceptualised the detailed plan indicated that the real objective of the Nagpur-Mumbai Supercommunication Expressway is not just about hi-speed travel. What is more significant is agro-industrial development in the 20 districts, which gives it added advantage due to connectivity to JNPT port.

Moreover, the Centre and the state have taken decision on two dry ports at Jalna and Wardha.

It is envisaged to make Nashik an industrial hub, Amravati a textile hub, and Aurangabad an industrial and tourism hub, through public-private partnership. Already, eight textile projects are under way in Aurangabad, government officials informed.

While emphasising on port development, Fadnavis said that from Nagpur to JNPT, it will take only eight hours travel. The distance between Aurangabad and JNPT would be just four hours.

Vidarbha continues to remain a backward region

Despite all the emphasis that the Maharashtra government has placed on developing Vidarbha region as a cotton textile manufacturing belt, this has not happened. The region that produces thermal energy, is marked by absence of power, infrastructure, water, which has led to absence of any meaningful industrialisation or creation of jobs, resulting in labour migration. Government inaction and absence of development policies has been a major reason for farmer suicides.

A recent report by FICCI-SPJIMR shows that the state government's claims of attracting domestic and foreign investments may not be all true. According to the report, investment appears to be the largest challenge to growth for Maharashtra, the richest state in the country by GDP.

Maharashtra, with a GDP of $0.25 trillion, is the richest state in India, followed by Tamil Nadu ($0.17 trillion) and Uttar Pradesh ($0.16 trillion). Maharashtra reported a nominal gross state domestic product of US$ 0.29 trillion in 2015-16. Thus, Maharashtra needs to grow by $0.71 trillion in the next nine years, i.e. over 2016-25, to achieve the $1 trillion-state status.

The state would have to grow at a compound annual growth rate (CAGR) of 14.4% in real terms to attain this mark by 2025. Compare this to the real rate of growth achieved in 2015-16 of 8.5%, and the challenge becomes stark.

The Handbook Of Statistics On Indian States reveals that the investment rate in Maharashtra in 2014-15 was only 3.5%. For Maharashtra to achieve 14.4% growth by 2025, investment in the state will need to grow to at least 12.24% per year from the current investment rate.

Thus, investment appears to be the largest challenge to growth for the state. And textiles does not figure too prominently in the state's development plans.