Indian textile industry holds an important place in the economy of the country. It contributes around 4% to the country’s GDP and provides direct and indirect employment to approximately 105 Mn. people. India is currently the second largest manufacturer and exporter of textile and apparel after China. The Indian domestic market is estimated to be around US$ 85 Bn. while the T&A exports of India was around US$ 40 Bn. in 2016, with a share of around 5% in global T&A trade. Indian domestic and export market is poised for positive growth owing to structural changes in the country and international events shaping global trade. Keeping the importance of the industry in mind and positive future outlook in both domestic and international market, the Government of India launched the Scheme for Integrated Textile Parks (SITP) in 2005 to boost investment in the sector.

The scheme was launched to provide the industry with state of the art world-class infrastructure facilities for setting up their textile units. The scheme targets industrial clusters/locations with high growth potential, which require strategic interventions by way of providing world-class infrastructure support. It was approved in the 10th Five Year Plan (July 2005) by merging the erstwhile Apparel Parks for Exports Scheme (APES) and Textile Centre Infrastructure Development Scheme (TCIDS). It has been running successfully through the 11th and 12th five year plans. Now, as per the Gazette Notification on 23rd March, 2018, the Government of India has approved to continue the Scheme for another 3 year i.e. the scheme is valid till March, 2020.

As per the scheme, industry associations, group of entrepreneurs and state government agencies can be the main promoters of the park. Each integrated textile park (ITP) needs to form a Special Purpose Vehicle (SPV) with the representatives of local industry, Financial Institutions, State Industrial & Infrastructural Corporations and State & Central Government.The park is be funded by the Ministry of Textiles, State Governments and State Industrial Development Corporations in the form of grants to the tune of 40% of the eligible project cost, with a ceiling of Rs. 40 crore. Further, the grant is released in 3 installments in the ratio of 30:40:30 depending on the milestones set by the government.

The scheme has been successful in the past in attracting investments with 74 parks sanctioned till date. The major textile clusters likeGujarat and Maharashtra have the highest number of Textile Parks, 14 in each state, followed by Tamil Nadu and Andhra Pradesh with 8 and 6 parks respectively.

Most of the parks are functional and are involved in production of spun yarn, fabric weaving and knitting, fabric processing, garmenting, made-up manufacturing, and technical textiles.These textile parks have done appreciably well to ensure environmental compliance mainly because of adherence to scheme norms. Under this scheme, India has witnessed some of the best textile parks with world-class technology and infrastructure facilities. For example, Brandix India Apparel City in Andhra Pradesh has around 17 units with an employment of 17,500 people. Other successful parks running in India are Rythm Textile & Apparel Park in Punjab, Surat Super Yan Park &Fairdeal Textile Park in Gujarat and Baramati Hi-Tech Textile Park in Maharashtra among others.These parks have also contributed significantly in improving the working conditions of the workers. Facilities like canteen, crèche, healthcare centre, and banking services within the park have been created for worker welfare.

However, land and SPV issues have led to cancellation of 8 parks.The major reasons behind cancellation of the parks were – delay in conversion, clearances, disputed lands and non-availability of land. Sanctioning delays and differences between SPV members were other reasons that led to park cancellation.

Given the amount of time, effort and investment required, it is important to conceptualize the parks to suit the needs of the investors and buyers. Among other factors, formation of SPV is an important step. It is important to vet the economic status of the members so as to avoid depletion of funds midway in the project. Another important aspect is the conceptualization of the park. It is important to choose the right segment mix for the park keeping in mind the current and target markets. Undertaking a market study to identify potential products for production, capacity of the same and market needs can help in finalizing the target buyers. Identifying the major infrastructural requirements based on the finalized segment mix also becomes important during the conceptualization stage for the smooth functioning of the park.

Moreover, many parks have failed due to bad location of land or disputed land. In line with market analysis, location analysis also plays a major role in understanding the potential and target customers. A park situated at a considerable distance from the market will have some inherit disadvantages like increased logistic costs among others compared to those players who are at the vicinity of the market. Further, a proper location analysis also helps in understanding other fiscal and non-fiscal advantages that can be gained. Finally, to get the park sanctioned by the government and to avail loans from the banks, it is important to prepare a Detailed Project Report (DPR) that meets the requirements of all the stakeholders involved. A detailed financial plan including project cost, operational cost, manpower requirements and financial projections for the coming years helps the government and bank understand the revenue potential that a park holds and helps in easy clearance of the same.

Brands today are looking for a one-stop destination for their purchases. Leading apparel manufacturing destinations like Bangladesh and Vietnam have realized the importance of presence of value chain and are developing it given the demands from buyers. Thus, consolidation today is playing an important role. Textile parks offer a good opportunity to develop the entire value chain in one place and serve the needs of the buyers. Given the growth potential of Indian textile & apparel industry and investor friendly environment being created by both the Central and State Governments, continuation of the scheme is a very good opportunity for people looking for a good investment.

The article has been authored by Sanjay Arora, Business Director and ManjulikaPoddar, Consultant.

It was published in June 2018 in Tecoya Trend.