Expectation from Mega Integrated Textile Region and Apparel (MITRA) announced by India under Union Budget FY22

With the objective of rendering the Indian textile industry globally competitive, the government put forth a scheme by way of the Union Budget 2022 for the establishment of mega textile parks, expected to augment job opportunities through infrastructure on par with international standards.

According to Finance Minister Nirmala Sitaraman, seven mega textile parks dubbed “Mega Investment Textiles Parks (MITRA), will be established over the span of three years, with the expectation of attracting large investments will be launched alongside the Production-Linked Incentive (PLI) scheme.

Pertaining to the PLI scheme, it was announced that an expenditure of around Rs. 1.97 lakh crore was put forth by the government for the upcoming five years starting from 2021, to supplement the functions of scaling and sizing in keystone sectors to nurture and create global victors and generate employment for Indian youth.

Infrastructure is likely to involve ‘plug and play’ facilities to expedite export champions in the global arena enabling the members of such parks to avoid huge capital expenditure outlays. This model’s advantage is that it offers a ready-to-use basic framework with the help of which investors can save a lot of time and ease the process of setting up.

Some features that will be introduced are quick turnaround times to reduce transport losses and integrated facilities.

During the delivery of the budget speech, Sitharaman deliberated upon the necessity of rationalisation of taxes on raw material input to man-made textiles with regard to economic contribution and employment generation functions. The government has stipulated that it now put forth nylon chains on par with polyester and other man-made fibres. The BCD or Basic Customs Duty rates on nylon chips, yarn, nylon fibre and caprolactam are being uniformly reduced to 5%, which will help the textile industry, exports as well as MSMEs. In order to benefit farmers, the customs duty on cotton is being increased from zero to 10% and 10% to 15% on raw silk and silk yarn.

The exemption on certain types of leather has been withdrawn owing to the reason that they are domestically produced in adequate quality and quantity, majorly by MSMEs. As an incentive to exporters of 36 handicrafts, garments and leather items, there is rationalising exemption on the import of duty-free items.

While the details of the scheme are not available for public scrutiny, the government has summarized its main features with each park encompassing 1,000+ acres of land with modern state-of-the-art infrastructure, common utilities, R&D Lab, workers’ family accommodation and plug-and-play facilities under consideration.

The ultimate objective of this project is to furnish globalization in the context of the Indian textile industry to encourage participation and creation of new global benchmarks of quality and to attract large investments. It is also aimed to raise exports and employment generation.

Keeping in view the case of the Scheme for Integrated Textiles Parks (SITP), there is reason to doubt the success rate of the MITRA scheme without infrastructural prerequisites. Despite the best efforts of the Ministry of Textiles, its plans for regulation of the SITP, launched in 2005, have failed to yield the desired results.

The main reasons for this can be attributed to the small size of the parks, cancelled development due to delays in conversion, clearances, disputed lands and even non-availability of lands, and dearth in marketing support from the government. Around 59 textile parks were sanctioned under SITP, out of which a meagre number of 22 parks were completed.

There was a decreasing ability to coordinate the units of the park, failure to achieve economies of scale in addition to the absence of an interconnected theme towards the processes of raw material sourcing and marketing. The right investors were not involved to supplement the project.

How far will the government take MITRA in attempting to achieve the set objectives? Has there been an attempt to learn from the mistakes from SITP? 

However, it also contains a positive aspect in the sense that it seems to align with the government’s agenda to encourage large scale models and intensify the scale of operations. A few areas that MITRA ought to keep in mind are the availability of incubation centres, testing labs, readymade factory warehouses alongside express connectivity to airports and seaports. A committee, specialized in studying the functioning and management of mega textile projects can be constituted in order to track the progress and monitor the mistakes that have prevented past initiatives from achieving success and efficiency. There are pertinent labour concerns as well, considering post-covid scenarios. The areas that could potentially serve as locations for these mega textile parks might have to consider migratory labour issues. Creating apparel giants in areas where labour will have to migrate is something to watch out for. There might have to be some form of compensation in order to attract migratory workers.

A dedicated interconnected industrial cluster that deals with procuring raw material to labour induction is something to be handled efficiently to mitigate long term negative consequences. A new area that would greatly benefit the success of this program is the inclusion of sustainable forms of energy in order to power the parks. The assertiveness and enthusiasm of State governments are also factors that propel development. This already seems to be secured as States have been seen lobbying hard for textile park development since the introduction of MITRA. Internationally, textile parks are not less than 100 acres. Nevertheless, in the past, several approved projects span less than 25 acres. Thus, the MITRA scheme, with each park spanning over 1.000 acres, has the potential to change the textile landscape of India across a global spectrum. In the past, India has missed numerous opportunities for investment from Chinese companies, due to the US-China trade war and strong anti-China sentiment. However, there may still be hope for a few global manufacturers to invest in these new textile parks. There is enough evidence to support the conclusion that with the prescribed infrastructure, which includes over 18 points of appreciation, ranging from warehouses to factories, readymade factory sheds to work dormitories, all owing to MITRA, could potentially show up as a massive success.

Sources:

1. https://www.deccanherald.com/business/union-budget/mitra-to-make-textile-industry-globally-competitive-finance-minister-nirmala-sitharaman-946365.html
2. https://in.apparelresources.com/business-news/trade/will-mega-investment-textiles-parks-mitra-succeed/
3. https://journalsofindia.com/mega-investment-textiles-parks-mitra/