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Are weak industry policies propelling apparel manufacturers to move out of Ludhiana (India)

by Apparel Resources

05-April-2018  |  7 mins read

Some current developments hint to the fact that the apparel manufacturing units, especially those which are export-oriented, are likely to move from Ludhiana. Recently, there was a tussle-like situation between Ludhiana-based apparel exporters (who are exploring options in Bihar as the State Government here is offering many lucrative incentives) and the Punjab Government officials, who wish that these exporters should stay in Ludhiana or nearby areas within Punjab. Many of the manufacturers are of the strong opinion that they will have to definitely move from Ludhiana as incentives in the city are not sufficient to make them competitive, while some say that despite lesser incentives offered by the Punjab Government, Ludhiana is still reasonably a good place to work.

The situation caught the attention after a group of Ludhiana-based exporters visited Bihar and met officers to discuss the possibility of investing nearly Rs. 500 crore in a cluster form. Following this visit, few other states, like Chhattisgarh and Karnataka also approached them for investments, and now these exporters are comparing various incentives and other allied factors to finalize where they should go. Even Maharashtra is expected to introduce textile policy in two months and would majorly focus on power availability at cheap rates.

Punjab’s Perks

• Recently announced its new industrial policy for new and existing industries.
• Rs. 5 flat electricity rate.
• 100 per cent exemption of state GST for seven years.
• Waived stamp duty, CLU and property tax for the new units.

The discussion on incentive-based investments started last year in October when Bihar Government officials organized a business meet in Ludhiana to draw investment and strengthen its textile industry where a detailed presentation was given by S Siddharth, Principal Secretary (Industries), Bihar. Following the same, this year in January, Harish Dua, President, Knitwear and Apparel Exporters Organisation; Narinder Chugh of Million Exports; Rajat Sood of Oriental Dyeing and Pawan Garg of Worldwide Textiles visited Bihar and tried to finalize the things. Apart from S Siddharth, R.S. Shrivastava, MD, Bihar Industrial Area Development Authority (BIADA) and several other officials also met them. And after this visit, it was said that upcoming textile manufacturing facilities are expected to generate employment opportunities for more than 20,000 workers in Bihar. Now this group of exporters are pushing other exporters/manufacturer in their circle to invest in Bihar. Process is going on to make a roadmap of their plans to set up units there and accordingly submit proposals to the State Investment Promotion Board (SIPB).

Why Bihar…

Compared to Punjab, the cost of land acquisition in Bihar is almost nil. Bihar has offered developed land at Dehri On Sone (150 km from Patna) at a very nominal amount (cost of Rs. 18 lakh per acre for 99-year lease, means lease amount just Rs 18,000 per year). Availability of cheap labour in Bihar is also a big factor for considering the state as more than 70 per cent of the workforce in apparel industry in Ludhiana comes from Bihar. The State Government has assured security to the investors as some raised concern on issues like extortion. Patna’s proximity with Kolkata for port connectivity and Bihar’s booming domestic market are also big attractions for this group of exporters/manufacturers.

Brought to the table by Bihar

• Land registration exemption and an additional grant of 10 per cent interest on bank loans.
• Earmarked 115 acres of land for setting up apparel and textile park near capital, Patna.
• Promising to install free common effluent treatment plants.
• 100 per cent refund on SGST.
• 50 per cent assistance on the amount payable towards EPF and ESI.
• Skill development subsidy of Rs. 20,000 per employee.
• Online single window clearance system to submit proposals, online approvals as well.
• Electricity availability for more than 22 hours per day.

Views from the industry…

• “Wherever we will invest, one thing is sure that we are not going to continue in Ludhiana. It will be shifting with upgradation. With the support of State Government, we will be able to survive. Professionals will manage our factories there.” – Narinder Chugh, MD, Million Exporter, Ludhiana

• “Nobody will move from Ludhiana as many facilities like allied support of industry and middle-level professionals are still not in other states. We can get land at cheap rates in nearby villages of Ludhiana and already managing labour by skill development initiatives. I explored MP sometime back but shifting from established hub and to start in another and far away state is something very difficult, especially for SMEs.” – Ajit Lakra, MD, Superfine Knitters, Ludhiana; President, Ludhiana Knitters’ Association

• “Water quality of Bihar is good enough for processing and officers’ attitudes is also positive there. Wherever our clients will invest, we will go there but it will take at least two years for us after successful starting of their garmenting operations as processing industry needs huge investment and takes much time to start installation compared to a garment unit.” – Rajat Sood, Director, Oriental Knitfab; General Secretary, Ludhiana Dyeing Association, Ludhiana.

• “Nearly 16 apparel manufacturers will invest in Bihar and this initiative is expected to create 20,000 to 22,000 jobs.” – S Siddharth, Principal Secretary (Industries), Bihar

• “Punjab too offers ‘land on lease’, on demand. The state Government has pooled land of public sector undertakings and merged these into Punjab Small Industries and Exports Corporation.” – DPS Kharbanda, Director, industries and commerce, Punjab