The current slide in rupee may further boost textile manufacturers? export order books, but a significant structural issue continues to hinder the domestic textile industry?s ability to scale up operations and compete effectively with the world . This is despite the UPA government waking up to it almost as soon as the global Multi-Fibre Agreement came into effect three years ago.
In early 2006, a group of ministers (GoM) was set up by the Manmohan Singh government under the leadership of Union agriculture minister Sharad Pawar to examine the ?Textile Export scenario ? Performance, prospects and the way forward?. The GoM met on May 15, 2006 and discussed labour, power and transaction costs issues plaguing the textile sector.
Most significantly, the GoM considered a proposal to provide flexibilities to the textile industry in complying with three key provisions in India?s archaic labour laws?the Industrial Disputes Act of 1947 and the Factories Act, 1948. If granted, the relaxation of these labour law provisions could take India?s share in the global textiles market from the current 4% to 7% by 2010.
But all the proposals, labour laws included, on the GoM?s agenda have been hanging fire and are unlikely to see any progress till the UPA is in power, as neither has a GoM meet since May 2006 nor is it likely to meet ever again.
When contacted, Union textile minister Vaghela told FE, ?There seems no possibility of another meeting on the issue of labour reforms for the textile sector as this is a state subject. We had convened a state chief ministers? conference to generate consensus on the issue. Some states have undertaken reforms on the power or labour front on their own, like Tamil Nadu, Andhra Pradesh, Maharashtra and UP. We are now encouraging states to introduce reforms on their own.?
Indeed, given that labour, power and transaction costs are state subjects, the GoM called for a consultative meeting with state chief ministers and industry ministers, trade union leaders and other stake holders in July 2006. But the GoM, which includes Vaghela, Commerce and Industry minister Kamal Nath, Finance minister P Chidambram, former labour minister K Chandrashekhar Rao and deputy chairman of Planning Commision Montek Singh Ahluwalia, never met again to consider the outcomes of those discussions.
However, a senior official in the textile ministry said, ?The move could not make any headway because of the stiff opposition from Left parties and lack of will on the part of the Congress-led UPA. Going forward also, the proposals can not go through as no political party can take such a bold step (labour law reforms) when elections are due this year in several states and the Lok Sabha polls are scheduled next year.?
The GoM?s proposals on labour laws included providing special dispensation for the industry to relax the daily and weekly working hours under the Factories Act, from 9 hours to 12 hours and 48 hours to 60 hours, respectively, as long as workers were suitably compensated. The other significant idea was to treat textile export activity as a public utility service under the Industrial Disputes Act, so that the prospect of a flash strike is eliminated.
Most importantly, it was also proposed that textile units exporting more than 75% of their produce be exempted from the provisions under Chapter VB of the Industrial Disputes Act, which stipulates that a business with 100 workers or more cannot retrench them without government permission. The textile industry has been crying for a change in this law for long as it dissuades businesses from scaling up operations and becoming cost-competitive.
?This relief was sought as exports business is dependent upon orders, which are seasonal and contractual in nature. Retaining an excess labour force during lean periods or during initial stages of developing an export markets when order uncertainty is higher, can lead to financial difficulties,? the textile ministry official says.
?Cashing in on the opportunity presented by the Multi-Fibre agreement of 2005, India could emerge a major player in the global textile market provided the government ushers in labour law reforms and the power utilities in the country curtail their distribution losses to help bring down energy costs,? says Rakesh Vaid, chairman of the Apparel Export Promotion Council (AEPC).
“No producer can stay in business if he is uncompetitive on cost,? adds Vaid, pointing to the average cost of power in China being Rs 2.15 per unit, whereas in India , power costs range from Rs 3.40 to Rs 4.50 per unit.
The existing labour laws prohibited the industry to employ contract labour, while the major competing countries such as China , Bangladesh and Sri Lanka allowed contract labour in the textile sector. On account of this, the cost of production of garments in China and Bangladesh is cheaper than in India .
The Andhra Pradesh Government had taken the lead in the country by allowing contract labour in the Apparel Exports Park in Gundlapochampally. We wanted the Union Government to allow contract labour in the textile sector across the country. “Such a measure will not only boost our exports but also generate more employment avenues to the people,? Vaid said.
Now, instead of taking forward its own mandate, the GoM has been abandoned and states are left to do reforms on their own, as Vaghela admits. However, according to a senior Labour Ministry official, though labour is a concurrent subject as per the constitution, states can only do some elements of the reforms.
?States can facilitate the increase of working hours in the textile industry as long as the employers pay the workers overtime. They can even declare units as public utilities on their own. But when it comes to changing the conditions of the Industrial Disputes Act, it needs the Centre?s nod and the President?s assent to do this. This is impossible as per the UPA?s National Common Minimum Program and hence we have been turning down those requests from states,? the Labour ministry official said.
Incidentally, the only states that have increased the maximum number of employees that can be hired without inviting the provisions of the 1947 law, are Uttar Pradesh and Uttarakhand. The employee limit for units in these states has been set at 300.
One of the largest industries in the country, textiles sector is expected to have a total investment of Rs 1,94,0000 crore by 2012. Consequently, the industry could potentially generate an additional employment for 14 million persons. With an expected export turnover of about $50 billion by 2010, it may account for 25% of our total exports. The country’s export share in the global textile market at present is just 4%.
