‘Level playing field’ (an analysis of major textile and apparel states)

‘Level playing field’ is an emerging concept gaining momentum recently. Apparel manufacturers across the country complain about India not getting a level playing field compared to its global competitors especially Bangladesh and Vietnam. Most of the things, making India’s competitors competitive, are not in the hands of the Indian Government which is doing its best, in terms of whatever it can do in this regard. For example, efforts/progress on FTAs front is on a war footing. But at the same time, an imperative question arises here – Do Indian states, competing with each other to attract fresh investment, have a level playing field? Various states have their thrust to attract fresh investment but what about the companies, working there from decades and not expanding, not willing to add much capacities. There are several aspects making a state costly or cost-effective, compared to other states.

Minimum wage, electricity rate, nearest port connectivity and various subsidies are the four major parameters deciding the top apparel manufacturing states of India, and in this feature, we have focused on six major states – Tamil Nadu, Gujarat, Haryana, Telangana, Karnataka and Uttar Pradesh. Garment manufacturing for export as well as domestic is a major focus of all these states.

When it comes to Tamil Nadu, there is a difference of at least of Rs.3,235 per month compared to the minimum wage of various states.

Tamil Nadu’s wage for a skilled worker is less than than that of Gujarat’s unskilled worker. Similarly Gujarat’s wage for a skilled worker is less than Haryana’s wage of unskilled workers. But it will not be wrong to say that though some exporters pay more than minimum wage, a chunk of the industry also work on piece rate. Despite that, it is also a fact that the majority of factories are paying minimum wage to their workers. Workers’ discipline, productivity and efficiency are important factors in this regard as it is an accepted fact that workers in Karnataka and South India are far ahead compared to the workers in North India.

Tamil Nadu offers power subsidy to the powerloom and handloom sector. The handloom consumers are categorised under the domestic category. As per the state rules, all the handloom weavers are to be extended with free electricity of 200 units (bi-monthly) in addition to reduction in tariff rate applicable to domestic consumers.

As per Saur Energy International, Karnataka, Gujarat, Andhra Pradesh, Tamil Nadu are the top states with the best renewable energy installations in the last 4 years.

Though there is not much difference in the power tariff, it is pertinent to mention here that there are many companies across the country having less dependency on power supply as they have their own solar plants and South India is specially known for wind energy. India’s number one apparel exporter Shahi Exports’ solar power plants produce power worth 84MW, catering to 72 per cent of the energy needs across the company.

Apart from subsidies, incentives, overall policies, there are few other important factors that are subjective but clearly visible also. For example in the recent case of Kitex Group, more than 6 states offered lucrative options but the aggressiveness and promptness showed by KT Rao, Industries & Commerce Minister of Telangana was matchless and even Sabu Jacob, MD, Kitex Group was surprised and overwhelmed at the response shown by Telangana.

Often various states through their textile policies/ investor summits commit that they offer a lot of facilities, subsidies to the investors. But the majority of the benefits, across the states, are for fresh investment not for the existing factories. The only exception here is support for sustainable initiatives like the establishment of effluent treatment plants (ETPs), and Zero Liquid Discharge (ZLD), solar energy etc., and training initiatives. The Governments also encourage companies to conduct skill development training programs by reimbursing 75 per cent of the total cost of these programs subject to a maximum cost of Rs. 10,000 per trainee. More or less, all the states have such policies with some different terms and conditions.

Tamil Nadu in fact offers more subsidies compared to other states. To mention a few, it offers assistance of 15 per cent capital subsidy for setting up of ETPs/ Hazardous Waste Treatment Storage and Disposable Facility (HWTSDF) with ZLD, subject to a maximum subsidy of Rs.5 crore, financial assistance in the form of 10 per cent capital subsidy, with a ceiling of Rs.20 lakh per machine on purchase of wider width fabric printing machines.

Industry/entrepreneurs can’t do much on the existing inequality, disparity  among various states and the major solution for them seems to be their own increased productivity. In the new conditions post-Covid, majority of apparel manufacturers are on their toes. Despite the claims of various states that they are doing their best to support the industries, they have to see these disparities and improve their offering. No doubt, competition will always be there among the states but at the same time, they should also take into account that the industry should not suffer.