4 In the spinning sector all steps will be taken to ensure optimum utilisation of the spinning capacity.
 4 The growth and development of the handloom sector shall receive priority.
 4 Full fibre flexibility as between cotton and man-made fibres/yarn would be provided to the textile industry.
 4 Capacity expansion by existing units and capacity creation by new units would be permitted
 4 Controls and regulations would be reviewed for elimination, phasing out or modification.

Textile Policy 1985

The textile industry has a unique place in the economy of our country. Its contribution to industrial production, employment and export earnings is very significant. This industry provides one of the basic necessities of life. The employment provided by this a source of livelihood for millions of people, most of who live in rural and remote areas. Its exports contribute a substantial part of our total foreign exchange earnings. The healthy development and rapid growth of this industry is, therefore, of vital importance. In the past few years, the development of the textile industry has been guided by the policy framework announced in March 1981. While considerable progress has since been achieved in several areas under this policy framework the objectives of the textiles policy outlined in the Textile Policy Statement have not been fully achieved. Thus, the per capita availability for and the per capita consumption of cloth, of our growing population, still remain at a very low level. There is evidence of an increase in the incidence of sickness, particularly in the organised sector, reflected in a large number of closed units. There is unsatisfied demand for durable synthetic and blended fabrics at cheap prices, which is not being met by indigenous production. The full export potential of textile products remains to be realised. The textile industry has experienced fluctuations in its fortunes in the past also. However, an analysis of the current difficulties faced by the industry reveals that the present crisis of the industry is neither cyclical nor temporary, but suggests deeper structural weakness. Therefore, the government has reviewed the present textile policy and after careful consideration, has formulated this new policy for the restructuring of the textile industry in India with a long-term perspective.

Objective of the policy

The existing textile policy sets out a number of objectives. While each of these objectives is important, the multiplicity of objectives has inhibited the achievements of the main task of the textile industry, that is to increase the production of cloth of acceptable quality at reasonable prices to meet the clothing requirements of a growing population. Henceforth, the approach to the textile industry would be guided by this main objective. In the pursuit of this main objective, the employment and export potential of the industry shall be kept in view. The availability of cloth at affordable prices for the poorer sections of population shall be augmented.

Structure of Textile Industry

1. The textile industry has, so far been viewed in a compartmentalised manner either in terms of various sectors namely, organised mills, power looms and handlooms, or in terms of fibre use namely, cotton textiles, woollen textiles, manmade textiles and silk textiles. Classification on such grounds has led to structural rigidities in the textile industry. When the industry tend to be viewed in parts rather than as an integrated whole, it inhibits the technology use and production flexibility commensurate with the pattern of consumer demand. Such distinctions have led to the application of a policy mix which is sector-specific or fibre-specific resulting in the emergence of special interests on the one hand and fossilisation on the other. To achieve the main objective of the textile policy it is necessary to eliminate the existing structural rigidities and to evolve a more integrated view of the textile industry.
2. The proposed restructuring of the textile industry would have the following three main dimensions :

1. the industry shall be viewed in terms of the stages of its manufacturing process, namely, spinning, weaving and processing;
2. the industry shall be provided with flexibility in the use of various fibres; and
3. the industry shall be subject to more pragmatic policies regarding creation or contraction of capacities by units in order to increase competition and promote healthy growth in the industry.

1. In the spinning sector all steps will be taken to ensure optimum utilisation of the spinning capacity. The availability of raw materials for the spinning sector should be augmented. The infrastructure for the distribution of yam would be strengthened. At the same time, necessary measures to encourage and increase spinning in the khadi sector would be taken in view of its large employment potential.
2. ln the weaving sector, the distinct and unique role of the handloom sector shall be preserved. The growth and development of this sector shall receive priority. The composite mills and the powerloom have their own respective strengths and weaknesses. For the purpose of policy, powerloom in the organised mill sector and in the unorganised powerloom sector shall as far as possible be treated at par and allowed to compete on the basis of their inherent strengths and capabilities.
3. In the processing sector, the independent power processor and the processing houses in the mills would be treated at par and each would be allowed to operate on the basis of its competitive strength. The small hand-processing units with limited output will receive special consideration.

Flexible use of Fibre and Yam

The multi-fibre approach implicit in providing fuller fibre flexibility would be guided by the following considerations:

1. Full fibre flexibility as between cotton and man-made fibres/yarn would be provided to the textile industry. Greater fibre flexibility in the use of wool shall be provided in a phased manner to units licensed for cotton and man-made textiles; woollen units shall given full fibre flexibility;
2. Adequate availability of man-made fibres/yam at rease shall be ensured by increased domestic production such as necessary by imports;
3. Creation of capacity by new units and expansion of capacity existing units for production of synthetic fibres/yarn would be determined as to realise economics of scale in order to reduce costs of production;
4. Fiscal Levies on man-made fibres/yam, and on the intermediates used as inputs for the production of such fibres/yarn, shall be progressively reduced in such a manner as to facilitate absorption of increased domestic production so that the benefit flows to the consumer in the form of lower prices of synthetic and blended fabrics; and
5. The export window shall be kept open to man-made fibres/yarn.

Role of Cotton

The preeminent role of cotton as the main raw material of textile industry would be maintained. Utilisation of indigenous cotton would be ensured by domestic consumption and by experts of cotton, yarn and other manufacturers. Cotton growers shall always be assured off-take of their produce at remunerative prices. Cotton needed by the textile industry would be made available in adequate quantities and at reasonable prices. The role and functions of the Cotton Corporation of India would he reformulated to include price stabilisation operations. For this purpose, the Corporation would have the necessary access to international markets. The present imbalance of cotton shall be corrected by a mix of policies aimed at encouraging increased use of long and extra long varieties of cotton on the one hand and higher production of short and medium staple varieties on the other.

Capacity of new and existing units

Capacity expansion by existing units and capacity creation by new units would be permitted subject to the general industrial policies including the provisions of the MRTP Act and FERA. As a corollary, units would also be allowed to contract capacities, including closure of a unit or part thereof, wherever necessary and justified, provided the interests of the workers are fully protected. This approach would increase the degree of competition among units in the industry and create an environment conducive to a reduction in cost and an improvement in quality.

Compulsory registration of powerlooms

The unplanned growth of powerlooms in the unorganised sector has mostly tended to concentrate in a few areas. A significant proportion of the powerlooms remains unregistered and unauthorised. Henceforth, there shall be compulsory registration of all powerlooms. The organisation of production in the powerloom sector should be guided by the objectives of raising productivity, increasing efficiency, improving workers welfare and facilitating locational dispersal. In keeping with these objectives, a suitable package of measures would be evolved in order to bring about a healthy development of the powerloom sector. It would be ensured that powerlooms do not violate the locational guidelines for industries, particularly in large cities and metropolises. Effective measures would be taken to see that the powerlooms do not encroach upon articles reserved for exclusive production by the handloom. The Organisational set up required for the above purposes shall be strengthened. Encouragement of handlooms for development and modernisation in order to preserve the unique role of handlooms and enable them to realise their full potential as also to ensure higher earnings for the handloom weavers, the following main steps shall he taken:

1. The development of handlooms through cooperatives and Centre/State level corporations shall be intensified;
2. Greater emphasis will be placed on the modernisation of looms and provision of technological and other inputs for improving; productivity of handlooms and the quality and finish of handloom products;
3. Special efforts would be made to ensure adequate availability of yam and other raw materials to the handloom sector. The infrastructure for procurement and supply of such inputs at reasonable prices to the handloom weavers shall be strengthened through the operations of the National Handloom Development Corporation and the State Level Handloom Agencies;
4. The production of mixed blended fabrics of handlooms shall be encouraged with a view to improve the wages and earnings of the weavers;
5. Protection to handlooms will be provided by reserving articles for their exclusive production in the handloom sector under the "Handloom (Reservation of Articles for Production) Act, 1985. The provisions of this Act shall be strictly enforced and the machinery for doing so shall be suitably strengthened;
6. To improve the competitiveness of handlooms, steps would be taken to remove, as far as possible, the handicap of the handlooms vis-a-vis the powerlooms by suitable fiscal measures;
7. To improve the marketing of handloom products, infrastructure of marketing complexes, training of marketing personnel and intensive publicity shall be organised. Steps would be taken to upgrade the technical, managerial and administrative skills of personnel employed in the handloom sector;
8. To strengthen the database for the handloom sector for better planning and execution of handloom development programmes, a census of handloom shall be undertaken. The machinery for implementation, supervision and evaluation of handloom programmes shall be strengthened.

Beneficial Schemes for Handloom Weavers

In order to improve the working conditions of the handloom weavers and to provide direct benefit to them, the following schemes, among others, would be introduced:

1. A contributory Thrift-Fund Scheme to provide assistance to the handloom weavers during times of need;
2. A Work Shed-cum-Housing Scheme to provide a better place for work and living to the handloom weavers

Encouragement to produce controlled cloth through handloom sector

The responsibility for the entire production of controlled cloth shall he transferred to the handloom sector by the end of the Seventh Five Year Plan. The quantum of controlled cloth and jnl2tn cloth which was fixed at 650 million metres shall be suitably increased in order to provide a larger quantum of cloth at affordable prices to the poorer section of the population. Measures will also be taken to improve the duality of cloth and to ensure that it reaches the target group. The public distribution for controlled cloth would be strengthened and streamlined.

Expansion of khadi programme

All encouragement would be given to the expansion of the Khadi programme in view of its large employment and income generating potential in the rural areas, specially among women. Steps would be taken to improve the production process, upgrade the skills of workers, raise productivity, diversify the product range and strengthen the marketing arrangements under the khadi programme.

Steps to Remove Sickness of Mill Sector Units

1. The incidence of growing sickness in the textile industry, particularly in the organised mill sector, is a matter of great concern. The reasons for sickness are manifold and complex which include financial difficulties, managerial incompetence and negligence. Obsolete plant and machinery, inadequate maintenance, incorrect product-mix poor marketing, excess labour and poor industrial relations. While steps necessary to improve the health of the industry as a whole and to prevent sickness are indicated in this statement, unit specific problems would have to be tackled on a case basis.
2. The measures needed for the revival of a sick unit have to be based on a detailed and objective study of the causes that led to sickness and identification of the steps necessary to revive the sick unit. A distinction shall have to be made between units which are potentially viable and units which are not.
3. In the case of potentially viable units a rehabilitation package might, irt~rr· illin, comprise of provision of additional balancing equipment, replacement of existing machinery, change of product-mix, better marketing strategy, rationalization of labour including improvement of work norms, strengthening of management and organisation and adjustment of capacity in the different stages of manufacturing. In such cases, suitable financial package would need to be worked out. A nodal agency would be designated to evolve and manage this package. The financial and technical performance of such units shall be closely monitored.
4. In some cases, the units, although potentially viable, may have been led to sickness by inept management or mismanagement. In such cases, the existing management may have to be changed. Change of management will be essential in cases where restructuring of capital and liabilities is contemplated.

No takeover of sick units by government

The measures enunciated in the policy would enable some of the units to come out of their present difficulty. However, where a unit has no expectation of becoming viable in a reasonable period of time, there may be no alternative but to allow the unit to close provided the interests of the workers are protected. Takeover by the Government or nationalisation of such sick units does not provide solution to the problems of sickness and the Government would not, as a rule, intervene in such cases.

Protection to the labour/worker in case of closure of unit(s)

In the process of revival of sick units and in the event of closure or liquidation, the interests of labour shall be fully protected. All possible avenues must be tried before retrenchment to minimize the social costs of transition implicit in the restructuring of the textile industry. Rationalisation of labour and revision of work-norms would need to ~f negrr hated with labour to arrive at a satisfactory solution. The funds needed for payment of retrenchment benefit to labour shall be part of rehabilitation package and loans needed for such compensation shall be pro- vided on concessional terms. Displaced workers would be given priority in securing employment in other units under the same management or other Industrial units in the area. Concessional finance would be made available for providing opportunities of self-employment. Workers shall also be encouraged to form cooperatives to run part or whole of the units. Schemes shall he formulated for training and retaining of labour to facilitate employment.

Creation of Rehabil~tation Fund for Workers

1. It is of utmost importance that the interest of the workers who, might be displaced by the permanent closure of units is safeguarded. For this purpose, schemes shall be formulated to pro- vide relief for an interim period in addition to the statutory benefits. A Rehabilitation Fund for the workers of the textile industry would be created to provide relief to such workers for a limited period. Such a Fund shall, inter alia, be financed by a suitable cess on the textile industry.
2. It is necessary to monitor closely the performance of textile units to detect any sign of incipient sickness so that timely corrective measures can be taken. For this purpose, the monitoring mechanism at various levels shall be strengthened.

Modernisation in industry would be accelerated

1. One of the main reasons for the present difficulties of the industry is inadequate modernisation and renovation of old and obsolete plant and machinery. Despite encouragement and incentives by the Government, the industry has only modernised to a limited extent. Government policies would aim to accelerate the pace of modernisation in the industry.
2. There has been very little modernisation in the ginning area, which has adversely affected the quality of cotton and hence the end product of the industry. Expeditious replacement and modernisation of existing gins would receive priority. Concessional finance shall be made available for this purpose.
3. Modernisation in the spinning, weaving and processing sector shall be undertaken on the basis of carefully identified needs of each unit as to installation of balancing equipment, renovation of existing machinery, replacement and technology upgradation.
4. For the purpose of modemisation, adequate funds would continue to be provided in adequate measure under the soft loan scheme of the IDBI. In order to enable the industry to generate internal resources for modernisation, a Textile Modemisation Fund shall be created.
5. A national level Standing Advisory Committee on modernisation of the textile industry shall be set up, which would include representatives of management and labour as also suitable technical experts and representatives of financial institutions. This Committee shall identify on a continuous basis the need of modernisation and the type of modemisation that the industrial should adopt.
6. It will be ensured that in the process of implementation of modemisation programme the interests of workers are adequately protected.
7. The indigenous textile machinery manufacturing industry shall he given encouragement to reduce costs, upgrade technology and improve the duality of machinery. However, liberal import of such textile machinery, which is not manufactured indigenously, shall he permitted at or near the international prices.
8. For expeditious modernisation of the handlooms, research for evolution of improved types of handlooms and adequate arrangements for ensuring swift and smooth transfer of technology from the research institutions to the handloom weavers will be given priority.
9. More powerloom service centres shall be established to enable the powerloom weavers to improve their skills in regard to maintenance of equipment, design development and quality of weaving.
10. The Textile Research Associations would be actively involved in the process of modernisation and its monitoring and their role expected, so that they may also cater to the needs of the handlooms and powerlooms.

Future of NTC

The National Textile Corporation contributes significantly to the total production of yarn and fabrics in the organised sector. A number of mills under the NTC have been able to eliminate cash losses through a programme of rehabilitation. Greater effort is needed to implement programmes of selective modernisation so that as many units as possible become profitable. The continued operation of units, which are incapable of becoming viable would mean a continued drain on scarce resources and such units or parts thereof may have to be closed down to prevent any further losses. In such cases, the interest of the workers would be adequately protected. With the implementation of a programme of modernisation of equipment, strengthening and improvement of man- agtlmentl rnising productivity of labour and improvement of M·urk-cul- turc, it is expected that NTC would provide a stabilising influence and healthy competition in the textile industry.

World trade in textile liberalised

Exports from the textile sector contribute a significant portion to the total foreign exchange earnings derived from exports. There are, however certain constraints, both internal and external, which have meant that the full potential of textile exports has not yet been realised. In the international context, the Government shall strive to bring about liberalisation of world trade in textiles, which would alleviate the external constraints on our exports. In the domestic sphere all necessary steps would be taken to exploit our comparative advantage in this sector and to make our exports of textiles more competitive in the world market in terms of both quality and prices. For this purpose the framework of policy would ensure that inputs for export production including capital goods, are made available at or near world prices. At the same time, it would be necessary to intensify efforts in the area of product and market development, reorient marketing strategy and create capabilities for fashion and design development. Exports of products from the handloom sector, including silk products, have considerable potential in the world market. All encouragement would be given to assist in the realisation of this potential, insofar as export production is an integral part of the total production base in the industry, the measures for restructuring and modernisation of the textile industry outline in the policy shall provide the necessary impetus to exports.

Development and E~Epansion of Sericulture

The Government would continue to lay emphasis on the development of sericulture on account of its employment potential in the rural areas, high-income generation capacity and ability to earn valuable foreign exchange through exports. Encouragement and support will continue to be given to the Central Silk board the State Governments for rapid development of this industry in all parts of the country. Greater attention will be given to schemes relating to production of duality seeds, plantation of improved varieties and expansion of sericulture activities over larger areas and achieving a higher yield per hectare. The existing extension and training services for educating the farmers in the improved techniques of silk worm rearing and control of diseases would be strengthened. Efforts shall be made for the development of technology in reeling, weaving and processing for improving the durability of the silk fabrics.

Growth of Woollen Sector

Government would continue to promote the growth the woollen sector in order to ensure adequate availability of woollen and blankets at reasonable prices to economically weaker sections, particularly those living in the hill regions of the country. Programmes would be undertaken to auli?nent the indigenous raw wool production in tonnes of both quantity and duality. Since the indigenous raw wool production is not enough to meet the requirements of the industry, liberal policy regarding imports of quality wool as well as shoddy would be continued. Research and development programmes will be promoted so that cheaper and better quality woollen products are developed for the domestic as well as export markets. The knitting and apparel manufacturing sectors contribute significantly to employment generation and export earnings besides meeting the domestic demand for clothing. The Government shall pursue policies for strengthening, modernizing and developing these sectors.

Review of Marketing and Distribution System

The existing marketing and distribution system of the industry would be reviewed to introduce changes, wherever necessary in order to evolve a more efficient system which would reduce costs and margins and provide both consumer satisfaction and consumer protection. The institutional mechanism for market research would be strengthened.

Review of Controls and Regulations

The textile industry has been subjected to a number of controls and regulations, many of which have become irrelevant or unnecessary with the passage of time. Such controls would be reviewed for elimination, phasing out or modification, as the case may be. The Government hopes that the policy framework outlined above would facilitate the necessary restructuring of the textile industry in India, would er7uip it to make an increasingly significant contribution to output, employment and exports in the country and would satisfy the clothing needs of all sections of the population.