Hanging by a thread: Gujarat’s textile industry

Gerard Ortiz

Textile traders and cotton farmers say they’re suffering unprecedented losses. For a State half whose population is linked to textiles, such a crisis could have far-reaching consequences. With the Assembly polls scheduled in Gujarat later this year, A.M. Jigeesh explores whether this financial adversity could have political repercussions

Textile traders and cotton farmers say they’re suffering unprecedented losses. For a State half whose population is linked to textiles, such a crisis could have far-reaching consequences. With the Assembly polls scheduled in Gujarat later this year,  A.M. Jigeesh explores whether this financial adversity could have political repercussions

Hours after the Goods and Services Tax (GST) was launched at a midnight gala on June 30, 2017, a 38-year-old textile trader, Hitesh Sanklecha from Surat, started an indefinite fast against it.

During his protest, which lasted a total of 17 days, Mr. Sanklecha was backed by nearly 65,000 Surat-based traders, all of whom anticipated losses in their businesses after the introduction of the GST. During this period, he was able to organise a rally of two lakh people in Surat and 1.5 lakh in Ahmedabad. Anger was also brewing among the cotton farmers due to their falling incomes.

The contention of Mr. Sanklecha, and those who supported him, was that the introduction of the GST on garments — 5% on goods below ₹1,000 and 12% on goods above ₹1,000 — would push the trade away from the State to markets in Bangladesh and Vietnam that were offering attractive tax sops to garment manufacturers.

Exactly five years since the imposition of GST, Mr. Sanklecha says his worst fears about the tax driving the garment manufacturing business out of Gujarat have come true. Not only that, he adds, the entire textile industry has been crippled by rising input costs, falling production and a slump in demand due to several factors such as COVID-19 and the ongoing war in Ukraine.

As  The Hindu travelled around the State, traders associated with this industry talked about a decrease in exports, increase in the rate of cotton and rising costs of power and chemicals pushing up the production costs while the sales have dropped.

A leader of textile processing units said his business had been impacted by nearly 70%. One south Gujarat-based textile trader, who heads an association of 400 businessmen, said, “I haven’t seen such a crisis in my life.”

Cotton farmers talked about fluctuating MSPs, untimely rain and pest attacks. One farmer said that his production had taken a 65% hit.

With less than six months to go before the Assembly polls, all the three big political parties in Gujarat — the BJP, the Congress and AAP — are keeping a close watch on the developments unfolding in this sector.

While a senior BJP leader said he was hopeful that the Centre will introduce new, beneficial schemes for farmers and industrialists, a senior Congress leader promised “a healthy atmosphere” for the industry upon being voted to power. An AAP leader said his party will go to the people with “an alternative model” for farmers and industries.

Political significance

Millions of people in Gujarat are associated with the textile industry — from cotton cultivation to making yarns, dyeing, printing, embroidery works, stitching, to the sale of the finished product. Nearly 80% of farmers in Saurashtra and central Gujarat cultivate cotton. Nearly half of Gujarat’s population is linked with cotton farming, the State’s farmer leaders say.

Though textile industries are mostly located in Surat, Ahmedabad and Rajkot, cotton cultivation spreads across central, north and south Gujarat districts — Bharuch, Vadodara, Panchmahal, Dahod, Arvalli, Mahisagar, Porbandar, Jamnagar, Rajkot, Amreli, Bhavnagar, Surendranagar and Gir Somnath, as well as in the Saurashtra-Kutch region.

The BJP has so far been enjoying the support of Patels, who manage industries and cotton cultivation. But a constant decline in business of the cotton traders, as well as the anger among the cotton farmers, once again poses a threat to the party.

The protests that broke out in Gujarat in 2017, just months before the State was scheduled to go to the polls, such as the one led by Mr. Sanklecha in urban districts and by farmer leaders in rural parts of the State, had forced the BJP leadership to sit up and take notice.

The then Union Finance Minister, Arun Jaitley, a key party strategist, had held several rounds of discussions with the textile traders to pacify their anger.

Despite this, the Congress was able to substantially improve its tally in the Assembly polls by, among other things, riding the wave of unrest among the cotton farmers.

The party managed to improve its performance in 2017 by winning 77 seats, 16 more than it won in the 2012 Assembly polls.

Interestingly, the latest entrant in Gujarat politics — AAP — has made inroads in the State by winning municipal corporation wards in Ahmedabad, Surat and Rajkot — all of which are big textile hubs, and have faced huge losses in business and employment. Going into the elections, AAP is trying to position itself as an urban-centric movement that also doesn’t shy away from raising the issues of farmers and traders.

Several traders based out of Surat expressed unhappiness with the current state of affairs.

Over the past 15 years, during which the garment manufacturing process has become mechanised, Surat’s per day cloth production has increased from 2.5 crore metres to 4 crore metres. However, the demand has stagnated at 2.5 crore metres due to the overall slump in the market, say traders.

“Surat used to handle stitching works worth ₹15 crore on a daily basis. Now, almost the entire work has gone to Bangladesh,” says Mr. Sanklecha.

Aslam Cyclewala, a young Surat-based Congress leader, who has been working on the issues of textile workers and small traders, says, “Many small textile traders have shut shop and are now working as daily wage labourers for big traders. The market could basically never recover from demonetisation and GST.”

Farmers’ woes

Praful Khandhadia is a cotton farmer in Rajkot. His family has been cultivating cotton for the past two generations. The pink bollworm, a pest that infects cotton plants, has made Mr. Khandhadia’s life miserable.

“The pink bollworm is creating a lot of issues. Many countries that produce cotton have controlled this pest. But here, it is out of control. My cotton production has come down in the last harvest to 12 mann [one mann equals 37.32 kg] from 35 mann, a decrease of 65%,” Mr. Khandhadia says.

Despite the pest attacks, he says he was not awarded any compensation. Moreover, the crop insurance scheme, which covers farmers for such losses, has not been renewed in the last two years, he adds.

The sowing season has started. The farmers are using whatever money they made over the last season for sowing cotton again. “But if the production continues to decrease, we will be forced to think about shifting to other crops. We are sowing cotton over a much less area this year,” Mr. Khandhadia adds.

Senior Congress leader Madhusudan Mistry voices similar concerns. “Cotton farmers are facing a crisis in the State due to lack of any steady policy by the government. People are shifting to other crops now. The workers are also suffering. People are being pushed into uncertainty by this government,” Mr. Mistry says.

All India Kisan Sabha leader Dayabhai Gajera talks about how fluctuations in the MSP are impacting cotton farmers.

“In 2021, the government offered ₹1,205 for 20 kg of cotton as the MSP. This year, it is ₹1,260 per kg. In the open market, the selling rate is ₹2,500, which is almost double the MSP. We really don’t know what the MSP on cotton will be next year,” Mr. Gajera says.

“It’s not just the worm. Untimely rain has also resulted in the loss of our cotton crops. Nearly 80% of farmers in Saurashtra and central Gujarat cultivate cotton. This means that half of the population of Gujarat is linked with cotton farming,” Mr. Gajera says.

Attacking the BJP for the losses suffered by the State’s cotton farmers, Isudhan Gadhvi, a senior AAP leader in Gujarat and the party’s national joint secretary, says, “In the name of pleasing industries, the BJP has punished cotton farmers by not giving any compensation for their crop losses. The reality is that the BJP has no vision for farmers, workers or the industries.”

Impact of pandemic

Udyog Bharti is an old khadi unit in Rajkot district’s Gondal area. In this region, the BJP and the Congress saw a neck-and-neck fight in the 2017 Assembly polls.

Udyog Bharti’s secretary Chandrakant H. Patel says the rate of cotton has doubled in the last two years. “We are engaging 2,000 spinners and weaver families in 45 villages. Our aim is to attract the youth towards khadi and to create more employment in the sector. But the increase in the rate of cotton is likely to cause a further drop in the demand for our products in the coming months,” Mr. Patel says.

Jetpur, an industrial hub in the suburb of Rajkot, with its thousands of dyeing and printing units, is famous for its cotton fabric prints.

One of its cotton sari traders, Umakant Joshi, says thousands of people here have lost their jobs over the past one year. Mr. Joshi himself shut down a fabric printing unit that he had started in 1985.

Mansukh Khachariya, the BJP’s Rajkot unit chief and president of the Dyeing and Printing Association, agrees with this observation.

“Traditionally, our sales pick up just before festivals and weddings. But over the last two years, the demand has been very low due to COVID-19, with all big social events being cancelled or postponed,” says Mr. Khachariya.

Another reason for the slump in business, he adds, is the increase in the price of cotton.

“Cotton prices have risen to ₹1 lakh for a candy [approximately 356 kg] of cotton. As a result, one metre of cotton cloth, which was priced at ₹20 a year ago, is now selling at ₹32. Also, due to the situation in Ukraine, raw materials such as colours and chemicals have become costlier,” Mr. Khachariya says.

Due to the dearth of raw materials, he adds, the production cost has increased manifold. “So, one cotton sari, which used to sell for ₹200 earlier, is now priced at ₹300-350. This has pushed our customers away and has directly impacted our business by about 70%,” he says.

Unkept promises

Ahead of the 2017 Assembly election, among the trader bodies that Jaitley met in order to pacify their anger against the GST, were the representatives of the Federation of Surat Textile Traders’ Association (FOSTTA), a powerful association of 65,000 traders from 180 markets of Surat. The reason was Surat’s huge influence over the State’s textile trade.

Jaitley’s efforts paid off with the BJP winning all seats in and around Surat, which is believed to be a “Hindutva stronghold”.

But FOSTTA leaders claim that none of the promises made to them, such as levying GST only once on textiles, was implemented.

The traders are wary of a proposal to increase the GST to 12% for all fabrics, which is pending before the GST Council. The council is set to meet on June 28 and 29.

FOSTTA president Manoj Agarwal and general secretary Champalal Bothra were part of the delegation that met Mr. Jaitley.

“Any increase in tax will further harm the business. Production has already been hit by COVID-19. We used to send 450 trucks of materials per day before the pandemic. Now the demand is for just over 100 trucks,” Mr. Agarwal says.

Mr. Bothra says GST is now levied at every stage of value addition.

“We suggested that the government either levy tax just once, before or after its processing. But the government levies the tax at every stage of the production and value addition. We have been fighting and the government has agreed to some changes,” says Mr. Bothra.

But the beneficiaries of the reforms that the government has agreed to undertake, Mr. Bothra says, will be the big players.

He adds, “For the sake of the country and for the sake of the industry, we withdrew the protests in 2017. But after five years, all the promises remain forgotten,” he adds.

Supporters turn critics

Ashok Jirawala is the president of the Federation of Gujarat Weavers Association (FOGWA), which was one of the traders’ bodies supporting the implementation of the GST. Mr. Jirawala, who switched from the BJP to the Congress, has joined the BJP again.

He too feels that the State government has been more sympathetic towards the interests of the big players.

“About five lakh people work in looms. We have 25,000 employers as members. We need the government’s protection. The big players do not provide as much employment as we do. But all the benefits go to them. We need subsidies to survive,” Mr. Jirawala says.

He is one of the trade representatives who believed that, at the time of its introduction, the GST was a much-needed financial reform. Today he is a GST critic.

“The GST system is maintained so poorly that it doesn’t serve the purpose for which it was framed. The purpose of the GST was to organise the entire textile industry. But that is not what has happened,” he says.

“Our input costs have increased due to a number of factors. The yarn prices are fluctuating on an hourly basis. In the end, the consumer is being looted,” adds Mr. Jirawala.

South Gujarat Textile Processors Association president Jitendra Vakharia represents more than 400 processing houses in various government panels, almost all of which are based out of Surat.

“The industry is going through its toughest phase in recent history. None of the 400 units, whose owners are part of our association, is functioning beyond 50% of its capacity. The sales have halved,” says Mr. Vakharia.

He added that June-July used to be the peak season for the processing units to finish orders that were received for the festival season starting in October.

“So, the production usually finishes before October. But this year, the industry has been hit. Even our working capital has dwindled. Some units work for just three to four days a week. My factory supplies garments to the best brands. But the retail market is also not moving. I haven’t seen such a crisis in my life,” says Mr. Vakharia.

He says the current crisis cannot be compared even with the crisis that hit the textile market in 2008, when Gujarat, among other industrial hubs, was hit by the global recession. Demand for textiles decreased and many units had to close down for months, causing huge job losses.

“We at least had working capital then. What we have today is a vicious cycle,” adds Mr. Vakharia.

Political repercussions

C.R. Patil, a BJP MP and president of his party’s Gujarat unit, says that the State’s textile industry is “doing good”. He says the drop in demand for textiles is a seasonal phenomenon and feels that it would bounce back as the festival season picks up.

“The State and Central governments have always helped our textile industry. I am sure that any other issues, including the continuation of the textile upgradation fund, will be considered by the Central government. The Centre always comes up with schemes that are beneficial for farmers and industrialists. The Opposition is playing politics over the issue of seasonal demand,” Mr. Patil says.

However, Mr. Mistry says that the “entire mentality of the State and Central governments is against growth”. He adds that if the Congress comes to power in the State, “we will come up with serious policy changes to revive the MSMEs in Gujarat”.

“The Centre should reduce the taxes on fabric and raw materials. Earlier, the entire process was done in a composite manner. Now, each work of value addition is done at various units and taxes are charged at each stage. The Congress will review the tax structure and electricity duty as millions of people are working in this sector. We have to augment this industry. There should be a healthy atmosphere for the industries to grow,” Mr. Mistry adds.

Apart from the Congress, AAP has also taken on the BJP over the issues of crop losses and unemployment. Mr. Gadhvi says that his party is working on placing “an alternative vision for cotton farmers and textile industries”.

“The BJP had promised a lot of schemes for the textile industries ahead of the 2017 Assembly election. But none of those schemes had any impact on the industries,” Mr. Gadhvi says.

He adds that AAP’s vision for the State is based on adding value to the agricultural produce and providing employment for the youth of Gujarat.

“Rather than promoting the export of cotton, we will promote spinning and weaving in the State, so that it provides employment,” Mr. Gadhvi says.

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