Diagnostic Survey and Business Plan for Handloom Sector in Bihar

EExxeeccuuttiivvee SSuummmmaarryy

Submitted to Department of Industries, Govt. of Bihar

Submitted By

INFRASTRUCTURE LEASING & FINANCIAL SERVICES LIMITED

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1. Background

The State of Bihar amply illustrates “poverty in riches” paradox. Even when the State was leading in terms of mineral resources in the country, this huge potential could never be converted into reality. Since Year 2000, when the State got bifurcated and most of mineral rich regions of Bihar became part of the State of Jharkhand, the challenges facing the state economy have only grown. Even as large parts of the country experienced the process of rapid industrialization over last decade and a half of liberalization, the State of Bihar found itself bypassed and untouched by this process. In fact, the State was witness to a process of deindustrialization over this period. Far from attracting fresh investments, even existing industries started getting closed down gradually. Not surprisingly, Bihar remains one of the least developed states of India, with a per capita annual income of Rs. 5,780 in 2003-04 against India’s average of Rs. 21,142. As has been depicted below, this divide has become sharper in recent years, and while the state’s per capita income was around 40 % of national figure in 1993-94, it got reduced to only 27 % in 2003-04. Another important development indicator further confirms the dismal picture of the state economy. Credit Deposit Ratio (CD ratio) of the state is less than half of the national average. At 30.2, this is just one third of the CD ratio of the entire western region and compares poorly with even neighboring states like UP (42) and West Bengal (57). The State of Bihar is today at the most crucial juncture. After a long hiatus, the process of development is again getting the requisite momentum. However, the State faces daunting task of first catching up with rest of the country and then keeping pace with it. Considering the potential of the state economy and its existing resources, the Govt. of Bihar has decided to accord priority to sectors like food processing and handlooms. It is in this context that IL&FS has been mandated by the Department of Industries, Govt. of Bihar, for diagnostic survey and preparation of business plan for seven handloom districts (clusters) in Bihar, viz., Gaya, Bhagalpur, Madhubani, Siwan, Biharsharief, Darbhanga and Patna. These seven districts were identified by the Govt. of Bihar considering their importance in the state handloom sector as also future potential for their growth. The mandate was essentially aimed at coming out with a strategy for revival and sustainable growth of the handloom sector in the state with a focus on increased income opportunities for the weavers in the State.

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The assignment was started with a scanning of secondary data available about the handloom sector in general and in particular about the status of the sector in the state. Also, it was realized that a proper perspective of the sector in the state would necessitate inputs from other prominent handloom clusters in the country. Thus, a visit was carried out to Chanderi cluster in MP, which is one of the most prominent clusters in the country and has also experienced UNIDO’s three year project intervention. The diagnostic survey itself was carried out in two phases: qualitative and quantitative. The survey, in the identified seven districts of Bihar, was aimed at identifying the constraints precluding the development of the handloom sector with a specific focus on the weavers. The survey also evaluated the efficacy of the delivery platform put in place by the Government of Bihar manifesting in varied policies and programmes to improve the income level of the weavers. The ultimate purpose of the survey was to come out with credible inputs and database for the formulation of a sustainable business plan to economically empower the weavers who represent the weaker sections of the society. The survey attempted to understand the state environment for weaving sector by looking at the socio-economic status of the weavers and matters like present production status, demand and supply gaps, appropriateness of techniques and tools used, appropriateness and relevance of designs in respect of market, present skill level and availability, potential of the fabric produced for both domestic and export market, existing backward and forward linkages, availability of credit for weavers in the clusters and finding out the requirement for infrastructure.

2. Textile Industry

Indian textile industry plays an important role in Indian economy with significant contribution to industrial production, exports and employment. The industry has high growth potential given its inherent strengths such as abundant raw materials, low labour cost and a thriving domestic and global market. With annual exports amounting to US$ 13.5 billion and very low import intensity (1.2 %), Indian textile industry is the single largest foreign exchange earner for the country. It also accounts for 14 % of industrial output, 9% of excise collection and 18% of employment in industrial sector.

2. 1 Handloom Sector

In this age of rapid mechanization, Handloom evokes images of a bygone era. This though is far from true. Even as the sector has seen gradual decline over the years, it remains a significant component of the textile industry, providing employment to about 65 lakh persons in the country. It also contributes significantly to the country’s exports with the sector contribution amounting to around US $ 550 million. More important, the sector remains a source of livelihood for the most marginalized of our population. Also,

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the sector represents and preserves the legacy of our age old socio-economic traditions and rich diversity like no other.

2.2 Stagnation and Decline Often romanticized, the sector is today largely a story of impoverished weavers who are fast migrating to large cities in search of alternative sources of livelihood and ending up as unskilled labour for other sectors. The sector is passing through difficult days, as it has largely failed to keep pace with the change in market conditions. Despite a slew of schemes and programmes run by various government agencies for promoting the sector, production in handloom sector has been continuously declining over the years. While the total production of cloth has increased from 34,838 million sq. mtr in 1996-97 to 45,378 mill sq. mtr in 2004-05, the production of handloom sector has declined from 7,456 million sq. mtr to 5,722 million sq. mtr during this period. Thus, while the total production of cloth has increased by about 30 per cent during this period, the production of handloom sector has actually declined by about 23 per cent. The data available from the Second Handloom Census (1995-96), the last such survey done nationwide, also shows that total no. of handloom units in the country declined from 29.97 lacs in 1987-88 to 25.42 lacs in 1995-96. The no. of looms declined from 37.79 lacs to 34.86 during this period. This has resulted in share of handlooms in total production of cloth coming down from 21.40 per cent in 1996-97 to mere 12.61 per cent in 2004-05. 2.3 Regional Distribution Handloom sector has great regional variations and some of the states like Assam and Manipur have rich handloom traditions and dominate the sector. As per the Second Handloom Census, the states of Assam (10.97 lacs), West Bengal (2.22 lacs) and Manipur (2.15 lacs) together accounted for as much as 64 per cent of the handloom units. Other states with major share were Tamil Nadu (2.02 lacs) Andhra Pradesh (1.45 lacs) and Uttar Pradesh (1.42 lacs). Bihar (0.52 lacs) though accounted for merely 2 % of handloom units. 3. Major Findings of Survey: The findings of the survey clearly indicate need for a fresh lease of life for the sector. The handloom sector in the state is fighting for its survival. Most of weaving clusters have either switched to power looms or weavers have migrated in search of job opportunities. The diagnostic survey has found the sector in the state essentially dispersed and unorganized and faced with several constraints to sustain itself. It is not surprising to note that the problems faced by the weavers in all the clusters witness convergence at the

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macro level. The microelements may offer certain variations in terms of production output but, by and large, the problems are in respect of obsolete technology, lack of requisite skill set and enabling common processing facilities, lack of credit availability and very weak market appreciation and linkages. In all, 440 interviews were conducted in identified 7 districts. A summary of findings in these districts (clusters) is given below : Districts (clusters)

Estimated no. of

weavers

Estimated no. of Handlooms

Major products Estimated Turnover

(Rs. in Lakh)

Biharsharief 225 200 Cotton Bed sheets and Silk fabric.

90

Bhagalpur 15,000 12,000 Silk-based cloth-length (Tasar, Muga, Katia, Eri, Gicha, and Mulberry), bed-sheets, scarves, stoles, furnishing material and dress material

35,000

Darbhanga 575 500 Towels and bed sheets 250

Gaya 675 500 Towels, bed sheets, silk fabric, saris and blankets

415

Madhubani 500 400 Thaan (cloth), Dhoti, Towels and Dasuti (rug).

180

Patna 850 700 Bed sheet and furnishing items, Dusters and bandages.

340

Siwan 1,850 1,550 Bed sheet, towel, waist-leg wrap (lungi), and shirting.

730

Total 19,675 15,850 37,005

Around 93 per cent of weavers are still working on pit looms and only 7 per cent were working on frame looms. Around 45 per cent of the looms did not have basic jacquard as an attachment and only 29 percent of looms had dobby attachment. While the weavers feel the need for upgradation of their pit looms to frame looms or with other technical attachments to enhance productivity, resources remain a constraint. This had a clear impact on the monthly income of the weavers. Of the weavers interviewed, only 34 percent reported an income of over Rs. 3000 per month and around 52 per cent earned below Rs. 2,000 per month .

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Most of these clusters have Primary Weavers Co-operative Societies but these societies have become defunct over the years. The withdrawal of Janata Dhoti and Sari Scheme in early 1990’s along with decline of khadi sector were cited as major reasons for decline of handlooms. Majority of the weavers (around 57 percent) face problems in procurement of raw materials, average volume of purchase of raw materials is low and quality of raw materials for most of the weavers is low which would result in low value realization. Only 15 percent of weavers reported quality of weavers as good. Most of these clusters do not have organized dyeing centers with modern facilities like water softening plants or dyeing chambers. On an average, 34 per cent of the weavers had in-house dyeing facilities and 40 per cent had in-house facilities for finishing the product. Of course, these facilities are very primitive and not suitable for high value products. All this has significant bearing on quality of final products and resultant poor value realisation by the weavers. Among the sample weavers, only one-third of the weavers had gone through a process of upgrading their skills, while majority admitted to not going through any skill upgradation programme. Non-availability of credit from institutional sources has been cited as one of the reasons for the absence of independent enterprises. The most important source of credit reported was of money lenders (34%), followed by family/relative/friends (25%) and banks (19%). In most cases, weavers were not familiar with various schemes run by the banking institutions for promoting credit to the weavers. The bankers were also found hesitant, if not indifferent, to credit needs of the weavers. Most of the bankers also seemed worried about ability or even willingness of weavers to pay back the loans. An environment of ignorance with regard to government schemes and programs for the betterment of their lot pervaded the clusters. In spite of various state govt. training institutions for the weavers, most of weavers have not been able to take advantage of them. It was clear that state govt. institutions, supposed to work for the purpose have been mostly disconnected with the status of the sector and weavers. However, this has also happened largely because of severe lack of resources with state govt. organizations, both in terms of physical and financial resources. Finally, lack of innovative designs, poor understanding of the market needs and consequently non availability of market remains the biggest obstacle in the way of the handloom sector in the state. It has to be understood that viability of the handloom sector is dependent on it catering to niche and high value market, both in India and abroad. Low value products, which can also be produced with power looms, can never sustain the sector and weavers. This would therefore necessitate modern design, requisite skill upgradation and market linkages with stress on brand promotion. A way forward can be

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to capitalize on the recall value of such historical locations like Nalanda or Vaishali or Mithila. Such marketing efforts combined with product development and innovative designs can make huge difference to the fate of state handloom sector.

4. Proposed Business Plan The proposed interventions along with budget outlay are given below:

Sr. No. Proposed Interventions

Estimated Project Cost

(Rs. lakh)

Proposed Budget

(Rs. lakh)

1 Upgradation of State training Institutes – Any intervention in the handloom sector in the state has to begin from upgradation of existing state resources. This would be necessary for equipping weavers with requisite skills. It is proposed to provide a grant subsidy of Rs. 10 lacs for each training centre and additional Rs. 25 lacs for Bihar Institute of Silk and Textiles.

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2 Revival of processing plants and co-operative spinning mills-

This would be another important step in the direction of revival of handloom sector in the state as these plants would be required for effective backward and forward linkages. The revival exercise has to begin with valuation exercise which would be required for inviting private investors

50

50

3 Modernisation/Upgradation of Looms – A major initiative would be modernization of looms. This is necessary for increasing production efficiency and value addition to the products. In this context, induction of TARA looms or other such looms and Jacquard/dobby attachment would be encouraged. It is proposed to provide a grant subsidy of 50 % of the cost of modern looms/loom upgradation to the weavers in the state.

1,000

(For 4,000 looms @ Rs.

25,000 )

500

(50 % grant for each modern

loom/upgradation of loom subject to a

maximum of Rs. 12500 per

loom)

4 Handloom parks – Provision of infrastructure to handloom units would be a priority. This may be done in form of development of handloom parks which would have modern enabling infrastructure

5,000 1,000

(200 lakh each

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Sr. No. Proposed Interventions

Estimated Project Cost

(Rs. lakh)

Proposed Budget

(Rs. lakh)

for weavers. An infrastructure subsidy of 20 % of the cost of the project would be provided for handloom parks, not exceeding Rs 200 lakh per park. This would be in addition to the SITP grant to improve the viability of handloom park.

for five handloom

parks)

5 Raw Material Bank – Procurement of quality yarns and making them available to weavers at reasonable rates would be significant for increasing income level of weavers. It is proposed to provide subsidy of 50 % for civil construction needed to set up raw material banks in the state. Also, a one time grant of Rs. 5 lakh would be given as initial working capital for each raw material bank .

100

(For 10 depots @ Rs.

5 lakh for civil

construction, 5 lakh for working capital)

75 (50 % grant for

civil construction ,

with a maximum of Rs. 5 lakh for each

depot, and working capital of Rs. 5 lakh for

each depot) 6 Dyeing Centres – Major handloom clusters would

also require dyeing centres (water softening plant, dyeing chamber, ETP etc.) to make the product marketable in the national market. Such centres would be provided 75 % subsidy on civil construction and plant and machinery.

60 (For 5

dyeing centres @ Rs.

12 lakh )

45

7 Post weaving/Finishing/Packing Centres – There would be post weaving centres/finishing and packing centres in major handloom clusters which would have facilities of screen/block printing, surface beautification/embroidery etc. Two such finishing centres would be initially supported with 75 % subsidy on civil construction and plant and machinery.

100

(For two centres @Rs.

50 lakh)

75

8 Design and product development– Handlooms would have to bring in innovative designs for attracting the modern consumers. This may be done through a series of training programmes/workshops focusing on design inputs largely based on local motifs. Leading designers of the country would be invited to the state for a close interaction with weavers

50 50

9 Brand-building & Market Promotion– This would be the most significant initiative for

300 300

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Sr. No. Proposed Interventions

Estimated Project Cost

(Rs. lakh)

Proposed Budget

(Rs. lakh)

handloom sector in the state. A major brand building exercise would be undertaken (which may use names such as Nalanda and Vaishali) to make the state products have a brand recall not only in the national but also export market.

There would also be an effort to link the weavers here to the national and international market though exposure visits, buyers-sellers meets, participation in exhibitions etc.

10 Group/Federation formation and related capacity building –

The weavers in the state would need to be brought together in major clusters of the state in form of SHGs and Federations. This would be required to undertake collective activities like setting up of yarn depots/common facilities centres, micro credit linkages and also in general take advantage of economies of scale. This would then require intensive capacity building exercise in the state.

100 100

11 Project Development, Implementation and Management – The success of all the above initiatives would require engagement of professional agencies for on project development and implementation. In particular, project management agencies would be required for setting up of handloom parks, raw material banks, dyeing centres etc.

100

(Project development

and Implementation

charges)

Total 6,865 2,400

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5. Implementation Mechanism for Proposed Business Plan

It is being acknowledged today that the schemes/programmes being run both by central and state governments have suffered in delivery due to lack of professional management. Also, project development has a crucial role to play in execution of any programme. The project development component involves identification of right stakeholders/beneficiaries and structure projects in keeping with the guidelines of the schemes/programmes. Thus, it is proposed to bring in an innovative effort to engage professional agencies for project development and implementation of various proposed interventions for handloom sector.

The state government may constitute a Project Approval and Monitoring Committee (PAMC) headed by Industrial Development Commissioner (IDC) which may have Director of Industries, Director (Handlooms), Director (Technical Development) and other state govt. officials as the members. PAMC would be responsible for approval of projects relating to proposed interventions including handloom parks. PAMC would also have a mechanism for regular review of progress of the projects.

The Programme Management Agency (PMA) would be an independent professional agency with multi disciplinary skill set and would be positioned for developing the projects under the scheme and hand holding them through the entire life cycle (from “concept to commissioning”).

The primary role of PMA would be to assist the Project Approval and Monitoring Committee in effective implementation of the proposed interventions. Thus, PMA will be providing need based technical support to the PAMC and Office of Director (Handlooms) to ensure that the projects are identified and implemented in keeping with the guidelines. The roles and responsibilities of PMA shall include information dissemination and creation of awareness about the state govt. programmes, project identification, preparation of detailed project reports, structuring the special purpose vehicles, financial closure, assistance to SPVs in project execution and management, release and utilisation of state govt. grant, coordination with central Government and other agencies/ institutions, monitoring and reporting etc.

6. Impact of Business Plan

The proposed interventions are aimed at turning around the handloom sector in the state with a focus on providing sustainable employment opportunities to the weavers. The proposed five handloom parks, each having around 2,000 handlooms, will lead to installation of 10,000 handlooms. In addition, weavers in other clusters are proposed to be provided support for 4,000 additional handlooms. A total of 14,000 handloom units would be providing employment to 35,000 people (Assuming one handloom providing employment to one weaver and 1.5 workers). Revival of three co-operative spinning mills and two processing

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plants are likely to generate employment for further 2,500 persons. In all, the proposed interventions are likely to generate employment for around 40,000 people in the state.

Compared to only 34 per cent of weavers getting income of over Rs. 3,000 per month presently, the proposed business plan is likely to ensure a minimum income level of Rs. 3,000 per month for all the weavers who would be part of proposed handloom parks and other proposed initiatives. Finally, the proposed business plan, if implemented successfully, can make significant contribution to the textile sector in the state as a whole and, in particular, can help revive the khadi sector, which would have huge positive spin off for the state economy.

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