Expansions have started taking place again as per the recent announcements made by leading apparel exporters about their plans. Tirupur’s Best Corporation is investing Rs. 60 crore in Madhya Pradesh (MP), Bengaluru’s Gokaldas Exports is also investing in MP and will create employment opportunities for around 4,000 people. And, Gokaldas Images is coming up with a garment factory in Telangana, initially to start with around 500 stitching machines. Few more companies’ similar projects are also in pipeline but they are not announcing their details of plans yet due to various reasons.
What is interesting to note is that these apparel export giants are moving beyond their traditional hubs which are like their comfort zones. They get raw material and labour availability, allied support easily in their own hubs. But still these three companies are first-time investing outside of their home states. One major reason that has motivated these companies and several others to move towards newer places is the availability of land and strategic change of policies in few states.
Best Corporation has been allotted 15 acres of land on 75 per cent subsidy compared to the market price at MP. The state’s Cabinet Committee of Investment Promotion (CCIP) has cleared this project.
On the other hand, there are instances when offering land at a cost-effective rate has not proved to be a good policy to attract investment. Recently Jharkhand issued notice to Orient Craft to return the land allotted to them for the garment factory. The company was allotted 25 acres of land in Ranchi, and now after 4 years, when it has failed to run a plant on this land, the Government has taken 18 acres of land back.
Time to focus on plug-and-play model, multi-storey factories…
Not only are emerging apparel hubs like Ranchi (Jharkhand) growing at a steady pace, even apparel hub UP is also taking significant decisions in this regard. The state is now focusing on plug-and-play model (ready facilities in terms of building, power-water-sewage connectivity, road connectivity, beside other basic things including clearances in hand required to start the new set-ups, multi-storey factories). For such factories, a minimum structure of four storeyed building, including the ground floor, will be permitted. The State Government is now committed on developing Agra, Varanasi and Meerut as garment manufacturing hubs.
As far as merits of plug and play model are concerned, especially for apparel manufacturing industry, one can see the examples of Ethiopia and Vietnam. This model is very much prevalent in both countries.
In Ethiopia, the Government keeps its infrastructure ready for the garment manufacturers – all they have to do is to go with their machines, hire employees, train them and have their factory up and running. Under this plug and play model, an apparel manufacturer in Ethiopia doesn’t have to go through the hassles of looking for land, constructing a building and getting permissions. Everything is done by the Ethiopian Government and garment manufacturers just have to start their operations.
Ethiopia’s strategy of providing plug and play infrastructure for the ease of investment was one of the reasons that K P Ramasamy, CMD, KPR Group decided to start a unit there within 36 hours of his visit to Ethiopia.
Even Odisha Government strongly believes that the plug and play model could make it worthwhile for companies to explore the opportunities, as it ensures easy entry. The State Government is also mixing it with independently-owned units so that companies become more serious about making their factories work effectively in the state.
It is worth mentioning here that as a discussion point, plug and play model has been there since at least 7 years as in 2014, the Government had announced that the Centre would set up one modern apparel garment manufacturing centre in each of the eight North Eastern states. For this, the Union Textiles Ministry had finalised a policy under which the Central Government would bear the cost of providing 300 machines to each ‘plug and play’ centre.
Despite all such appreciation and benefits, so far plug and play model is not applied much at ground level, especially at mass level. There is not any strong example yet where this plug and play model has been successfully executed in the Indian apparel industry.
Looking forward, the good thing is that the recently launched Mega Investment Textile Parks (MITRA) will create world-class infrastructure with plug and play facilities.
Generating employment opportunities is the main reason that many states are giving land at very reasonable rates to the companies. Take the recent example of allocation of land by Haryana Government to Flipkart for its fulfilment centre. The 140 acre land at Patli Hajipur in Manesar (Gurugram) belonging to Haryana State Industrial and Infrastructure Development Corporation Limited (HSIIDC), has been allotted at a price of Rs 3.22 crore per acre to Flipkart. This fulfilment centre will also create approximately 6,000 direct and 12,000 indirect jobs.
Is this not therefore the right time that various State Governments start thinking seriously in this direction? Along with land, the states can also offer reimbursement of stamp duty and registration fee on the execution of land lease documents to attract manufacturers.
After brainstorming for two years, The Department of Investment and Public Asset Management (DIPAM) has formulated a Land Bank policy which is yet to be cleared by the Cabinet soon. One should hope that with this, states will also restrategise their land allocation policies.
What more can be done to attract genuine manufacturers…
There is nothing wrong in giving subsidies to the industry especially for the starting of a factory but there are many other ways for doing the same, besides cheap land. State Government can connect subsidy or incentives to business or employment generation. States are using land as a tool to attract companies to start factories. Time and again, it has been said that there are execution issues. Land allocation and purchase is something one has to deal with once but issues like a refund of the state’s portion in GST, duty on electricity are regular hassles.
We can have a look at Telangana in this context. It is offering factories on a rental basis to the entrepreneurs.
Jagdish Hinduja, MD, Gokaldas Images confirmed in discussion with Apparel Resources (AR) that the premise which is being provided to them is as per their specification but on a rental basis. “Yes, many states are offering various kinds of facilities but we selected Telanagana due to the credibility of the State Government. Many states come up with promises but don’t fulfil them.”
Kitex Garments, the world’s second largest garment manufacturer, has scrapped its Rs. 3500 crore expansion plan in Kerala just because of the bureaucratic harassment. The project was announced one-and-a-half year ago and the company acquired 30 acres of land for the same. However, the company claims that 11 teams of officers from various departments have raided the company during the past one month.
Even in Jharkhand, when new Government took charge, timely release of subsidy became an issue while in Punjab, the industry is constantly facing electricity shortage. One can say that these issues are temporary but to ensure smooth operation and to attract more investments, these should be resolved proactively by the State Governments.
AR has earlier highlighted that Poor policy execution is the biggest culprit behind failed expansion plans.
So, apart from following major steps of plug and play model, State Governments have to ensure delivery of their commitments. And that too on the execution of policies as well as smooth functioning of administration.
