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Reforms in Khadi sector
Oct '10
To fully realize the significant growth potential of KVI sector, a comprehensive Khadi Reforms and Development Programme (KRDP) has been initiated by the Government with assistance to KVIC from Asian Development Bank. KRDP envisages re-vitalisation of KVI sector with enhanced sustainability of khadi, increased employment and income, increased artisans welfare through their capacity building, empowerment and enhanced earnings and also development of select traditional village industries.

The programme will be implemented by 300 selected khadi institutions over a period of three years which has already started with release of first installment of Rs 96 crore to KVIC in March 2010. Under this programme, each reform implementing khadi institution (KI) will be provided assistance of around Rs 1.19 crore to implement the identified set of reform activities.

Reforms are envisaged in raw material production leading to improved quality and reduced cost of khadi products, effective marketing with sophisticated professional support in the form of sales networking, better inventory management and design improvement. The unique brand image of khadi as an environment friendly heritage product would be harnessed through development of 'khadi mark'. Gandhian values will continue to be guiding principles in the entire reform process with focus on sustainability and growth. Around Rs 720 crore will be spent through KVIC on this programme between 2009-10 and 2011-12.

The budget allocation for khadi and village industries sector has been enhanced substantially from Rs 261 crore in RE 2009-10 to Rs 542 crore in 2010-11 which means an enhancement of around 107%.

MDA Scheme as an Improvement Over Rebate System
The Government had a system of providing 20% special rebate to customers for 108 days to coincide with Gandhi Jayanti/ local festivals to promote sale of khadi, a hand-woven fabric made from hand-spun yarn. Several Committees formed by the Government in the past had observed that a major part of the manpower and resources of KVIC remain engaged in administration of rebate, whereas main function of KVIC to develop the sector through appropriate schemes and other interventions required more emphasis. It was recommended that the system of rebate on the sale of khadi be substituted with suitable alternatives for Market Development latest by 31 March 2010.

Accordingly, after experimenting with several pilot trials and extensive consultations with stakeholders by KVIC, the Government introduced a more flexible scheme, namely, Market Development Assistance (MDA) Scheme on production of khadi in place of the earlier existing scheme of Rebate on sales with effect from 01.04.2010 for implementation by KVIC during 2010-11 and 2011-12.

The scheme envisages financial assistance @ 20% of production value on khadi and polyvastra which will be shared among artisans (i.e., spinners and weavers), producing institutions and selling institutions in the ratio 25:30:45. Under the new system of MDA, sales are expected to be evenly spread throughout the year and the institutions will have the flexibility to use the assistance for increasing wages to spinners and weavers, on improving the outlets and quality of products besides giving incentive or discounts to customers.

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