A policy of attraction
The Uttar Pradesh government, ahead of the Investors Summit 2018 to be held in Lucknow from February 21-22, carried out a series of policy promotion roadshows to attract investors. It has recently launched a textiles policy providing incentives including a ₹3,200 wage subsidy and 25 per cent capital subsidy, among others. Mukul Singhal, Additional Chief Secretary, Departments of Handlooms, Textiles & Sericulture, spoke to Hiral Oza at the Ahmedabad roadshow about the highlights of UP's textiles policy and steps taken to make headway in the sector.
The focus of the new textiles policy for Uttar Pradesh is on apparel manufacturing as it generates employment. How does the policy propose to meet the raw material requirements?
The new UP policy has emphasis on garmenting because that creates jobs, and that is where the final retail happens, which is the final product. But this policy integrates all aspects of textiles. The basic difference between this policy and the previous one is that this covers the whole gamut of textiles. It even covers leather accessories and leather garmenting along with jute, silk, spinning, weaving, handlooms and fashion accessories.
How much employment are you expecting to generate and in what timeframe? What percentage of this is expected to go to women?
We are looking at a modest figure of one lakh new people being employed. We would like that to happen in three years, but the horizon officially is five years. I am hopeful that we will be able to do that in three years. A very large portion is expected to go to women; however, we are not targeting women's employment specifically. Our policy has special incentives if more than 75 per cent women are employed. The normal belief is that textiles is a sector where women participate in a big way.
The power tariffs in the state are high. Do you plan to harness the state's abundant solar energy?
Oh yes! We have big plans to harness solar power. The strategy laid out in the policy is that there will be no electricity duty for the next 10 years. We will also liberally permit open access. The bigger focus for us is on harnessing solar power especially in regions like Bundelkhand near Jhansi and Lalitpur, where land is available in plenty and agriculture is not easy. We have a lot of land which will be used for solar power. There are serious efforts being taken to reduce tariffs using solar energy in regions where there is plenty of electricity. So, we are hopeful of providing a competitive electricity rate in the near future.
How many super mega and mega textile projects are expected to come up under the policy?
I would love it to be in hundreds. But being practical, I would be happy if we get 30-40 parks or 30-40 mega units. Parks are a different ballgame. The policy allows parks of a minimum size of 25 acres, which is very lucrative. If we can get 5-10 in the next two years, we would have begun well.
What is the focus on? Is it more on traditional handlooms and Banarasi weaves, or the new and evolving technical textiles?
We don't have raw materials for textiles in UP; we have labour and we have the market. The policy covers all areas of textiles. We don't want to limit our focus right away. We want to first look at what happens, and how people react. We would like to provide special incentives in terms of ease of doing business to specific sectors. So far, we have left it to the investors. But we are open to a very healthy debate on this. For super mega units, the incentives can be customised, but when we talk of special incentives, by and large we mean only financial incentives. There are other kinds of incentives, for example, if somebody is building a big industry or factory where they employ more than 20,000 people, then the state government will try and provide infrastructure like road and power connectivity. These are the things we are very much open to, and we would positively look at any large companies that require this sort of investment.
How would you describe the connectivity in the state?
We are offering an employment generation subsidy of ₹3,200 per worker for five years for super mega and mega units. This is one part, but the bigger part is the requirement of connectivity. Today, from Delhi to Gorakhpur, which is at the other end of UP, that borders Bihar, one can drive in 9-9.5 hours. That's the kind of road connectivity we provide. Between Delhi and Lucknow, the drive that used to take 11-12 hours, now just takes 5-6 hours. The state government has massive plans to connect eastern UP by the Poorvanchal expressway, which will go from Lucknow to Varanasi and Ghazipur. There is also a plan to build an expressway to Bundelkhand. Once this happens, we will have excellent road connectivity. Train connectivity is very good already. We are fortunate that both the eastern and western dedicated freight corridors have a junction point in UP. On the eastern dedicated freight corridor, half of the total length of the corridor lies in UP. Air connectivity is also good, if you look at the flights going to Varanasi every day; it's amazing. Lucknow, Varanasi, Agra, Gorakhpur are all well connected by air. The regional connectivity, for which formalities are already made, is also improving. It is going to connect almost all the divisional headquarters with Lucknow. It's clear that there is a lot of emphasis on connectivity. One big achievement in the last few months has been 20 hours of continuous power supply, which we plan to improve to 24 hours within a year. Hence, power and road are taken care of. Besides that, internet and telephone connectivity are good.
There's barely a place from where you cannot make a call or send e-mails from. There's a lot of focus on law and order by this government. There is an overall improvement in facilities. In all the roadshows we have been to so far, we have received positive responses. One is hopeful. Optimism is necessary.
A lot of labour has migrated from UP to other textile hubs like Tiruppur in Tamil Nadu for work. What labour reforms are in the offing under the policy?
It is true that the labour is from UP and is working in places as far as Tiruppur. For national integration that is a very good thing. But for the convenience of residents of UP, not so great. The new policy focuses on giving jobs to people in UP itself, especially in Bundelkhand and the eastern part of the state, where a lot of labour has migrated to Gujarat, Tamil Nadu and Maharashtra for work in this sector. We are also providing special incentives to those who set up industries here. There is likelihood of people getting jobs in proximity to their homes.
There is a lot of thrust by the UP government on shifting tanneries to clean Ganga. What steps are being taken in this direction?
The environment department of the state looks after it. There are court directives also on this subject. The state government will follow the court directives, but before that the state will share its point of view. We would like minimum disruption, but we do not want the Ganges to be polluted.
What will be the special incentives given to Poorvanchal, Bundelkhand and Madhyanchal?
The policy provides for a number of incentives. Anybody who buys land for setting up parks will be given an interest subsidy and the stamp duty is exempt. When you buy land from government agencies to set up an industry, you get 50 per cent subsidy from the state government. In Gautam Budh Nagar, the subsidy is 30 per cent. There is a capital subsidy of 25 per cent for units. There is an employment generation subsidy of ₹3,200. There are easy terms for electricity; we have tried to integrate the Pradhanmantri Awas Yojna with industrial parks and large industries, which employ lots of people. This would ensure people get accommodation close to their place of work. We are also giving transport subsidy for export and GST reimbursement. There is a plethora of incentives that we are giving. I dare say that this would be one of the best set of incentives ever provided in the country.
What is the annual production of the textiles sector? What percentage is exported?
UP is the third largest fabric producing state with a production of 13.4 per cent. In terms of silk production and silk saris we have a very large sector. Unfortunately, our problem has been the unavailability of silk yarn, since it is not produced in UP. We produce the cocoons, and buyers from West Bengal and Karnataka purchase them, and then they make yarns and send them back to us. This policy takes care of that. We are providing special incentives in rural areas to farmers and entrepreneurs to set up reeling units. Units that will buy cocoons from UP and convert into threads in the state will also get a working capital interest subsidy. We intend to promote silk production within UP. We also have set up a mission to increase silk production and hemp. Handloom, being a priority sector for us, we have special provisions to give scholarships to those who want to learn the art. We have also proposed a policy to provide capital subsidy to buy equipment to colleges that wish to train students in handlooms and powerlooms. We are also going to dovetail the government of India's schemes with additional benefits from the state government to encourage handloom and powerloom. The bigger thing that is forgotten about UP is that we are very good with embroidery like zari, zardosi, and chikankari. We also want to encourage that. We want these new parks that come up to be in adjoining pockets where such embroidery happens. We are looking at creation of self-help groups (SHG) of women in rural areas and integrate them with the textile and garment units.
Several states are offering attractive policies to investors. Please tell us why they should invest in UP.
A lot of locally available talent, a huge market, and a very proactive government.
The textiles industry is hugely dominated by MSMEs. What is being done to encourage investment from MSMEs in this sector?
The textiles policy is comprehensive. It lists financial incentives, but all other aspects of ease of doing business like single window clearing system are already detailed in the industrial policy of UP. They are all a part of the textiles policy, which incorporates all details of the ease of doing business. The other big difficulty has been the availability of land, which we have taken care of by identifying land banks. The state industrial development corporation and other organisations have identified land banks for setting up units. The policy also talks of plug-and-play units. We would try and build some of these. This will help us create focus areas, the natural ones being eastern UP and Bundelkhand.
What would be your concluding thoughts?
I want everyone to feel very comfortable when they come to UP. All industries small and big are welcome. All kind of investment has its role to play. Traditionally textiles and stitching have been the core skills in UP. The state is a very traditional society and all women and young girls are encouraged to learn stitching and sewing. Despite this, there is a huge workforce of men who are involved in this activity; so, it's an activity where all men and women are involved and the society gives complete sanction to this. This is the strength of UP, and anybody who wants to invest in UP should look at it as a very attractive destination. With the implementation of the new policy, people will find it attractive. I have already started receiving calls from Trichy showing interest to invest in UP. Last but not the least, the credit for such a liberal policy should go to the chief minister and the government.