The Centre will grant incentives to investors to set up the proposed mega textile parks with plug-and-play facilities over large areas of at least 1,000 acres each, while states will pitch in with land, textiles secretary UP Singh told FE.
The move is aimed at “building scale” across the textiles and garment value chain that has remained fragmented for decades, resulting in the country ceding export market share to much smaller economies, such as Bangladesh and Vietnam. Singh said it will also complement the recently-approved Rs 10,638-crore production-linked incentive (PLI) scheme for man-made fibre and technical textiles segments.
The parks will preferably be close to ports and house all sorts of textile and garment firms, including integrated facilities, to create a robust eco-system, according to Singh. The centre will likely release the incentives to investors in two installments — upon the completion of about 60% and 100% of work.
The investors will not just build infrastructure but even manage maintenance and other related facilities. They will be given to operate the park for a period of 25-30 years and they can collect fees from the companies that set up units there. Even small firms or fashion designers will be able to set up shop quickly, thanks to the plug-and-play facilities, Singh said.
Such mega parks will be able to better draw overseas buyers by offering a broad range of products and cater for large orders, given the greater synergy among its resident entities.
“Seven mega parks will be set up in the first phase. However, if a greater number of states, who are willing to offer land, approach us for the setting up of the parks, we will undertake a ‘challenge method’ to select the top seven of them, using certain criteria,” Singh said. The parks were announced as part of the FY22 Budget proposals.
The selection criteria could include the proximity of the land to ports, raw material availability and modes of transportation, among others.
The mega parks are the latest in a series of attempts made by the government to promote formalisation and build scale in the labour-intensive sector that has been hamstrung by millions of small units, supported by lackadaisical official policies for decades. Consequently, an overwhelmingly large percentage of firms, with very limited financial and operational heft to handle bulk orders, are scattered across the country, stunting its ability to raise exports exponentially and grab the space being vacated by China in this segment.
When India finally removed some of these shackles (by removing SSI reservation between 2001 and 2005, allowing fixed-term employment in garments in 2016, scrapping an anti-dumping duty on a key input for polyster staple fibre in the Budget for FY21, etc), low-cost economies such as Bangladesh and Vietnam — in addition to dominant China — had consolidated their positions in the world market and beaten India.
While Bangladesh’s garment exports have been bolstered by duty-free access to the US and the EU due to its status as a least developed country, Vietnam has made good use of its trade pacts with large markets, freer trade policies and massive Chinese investments. Of late, even much smaller countries like Cambodia and Myanmar, too, have recorded fast growth in garment exports.
The textile secretary expected that with a raft of initiatives undertaken by the government in recent years — including the announcement of the PLI scheme, introduction of export tax remission schemes like RoDTEP and RoSCTL and easier labour norms — and the mega parks now, India’s textile and garment industry is well-poised to record impressive growth and recapture lost heights.
Textile and garment exports shrank 8.6% on year to $33.7 billion in FY20 and saw a more dramatic, Covid-induced contraction of 10% last fiscal, worse than a 7% drop in overall merchandise exports. However, in the first four months of this fiscal, such exports have grown at a phenomenal pace of 106%, driven by an economic resurgence in advanced markets and aided partly by a conducive base.