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New clothes for the textile industry

May 10, 2000

The de-reservation of the textile sector and the decontrol of the sugar industry are a few of the measures proposed by a special group comprising Ratan Tata and Nusli Wadia. The group was set up to suggest ways to revive traditional industries including textiles, sugar, oilseeds and tea. The suggestions of the report if implemented, would go a long way in removing the distortions in the policy framework for these industries. For instance, many of the composite textile mills were rendered unviable in the early eighties with the restrictions imposed on the weaving sector coupled with the excise evasion done by the small scale powerlooms. Quite a few of the mills now want to sell of their land and relocate facilities.

The group has proposed simpler procedures for relocation, de-reservation of the knitting and processing segments of the industry (which would help India compete in post-WTO regime) and formulation of policies to encourage consolidation of the fragmented units. As far as the sugar industry is concerned it has proposed the decontrol of sugar.

So far 40% of the sugar produced by the mills has to be compulsorily sold at subsidised prices to the ration shops and the balance is allowed to be sold in the free market. However, the fact remains that if this practice is done away with the prices itself would settle down to lower levels since what is happening currently, is that levy sugar finds its way into the free market if the prices in the latter are higher. Meanwhile, no further investment is taking place in the sugar industry since such policy distortions are likely to hurt the viability of the proposed enterprises.

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