Wednesday, 28 September 2011

Crucial Issues of Silk Industry - Varanasi

Varanasi Handloom Products, made from fine silk are in big demand in India as well as abroad. Specially, the famous Varanasi hand-woven saree, since the ancient (Vedic) times, is ranked among the finest traditional sarees of India. It is believed that the weaving of Varanasi saree gained prominence during the Mughal rule. The traditional Varanasi handloom is exclusively known for its handwork of traditional weavers who developed the Varanasi Saree brand which is much sought for its intricacies, art and aesthetics.  The ancient and traditional art of making Varanasi saree has continued to be passed down from one generation to another.
Varanasi alone has more than half a million weavers involved in Silk/Handloom Industry. The majority of them are from socially and economically weaker section of society and extremely poor, spread out in and around 125 kms. of Varanasi. The Handloom/ silk industry is a source of livelihood of about 10 lac people in the region. Varanasi is famous all over the world for the quality of its products which could be maintained due to use of quality raw silk that is imported from China.  In this way, Varanasi is one of the main consumers of imported Chinese raw silk in the country.  
The Govt. of India acceded to long pending demand of Varanasi Weavers Fraternity and reduced Custom Duty on   import of Chinese Raw Silk in the Budget 2011 from 30% to 5%. It corrected the anomaly of inverted duty structure which will go a long way in boosting and giving life to dying silk industry that was in turmoil due to this steep imbalance duty structure. 
Earlier, Custom Duty on raw material (Raw Silk) was 30%, on finished product (Silk Fabrics) it was only 10%. At the same time, China kept on increasing price of raw silk from Rs.1750/- per Kg. in January 2010, it went on to over Rs.3000/-, a whopping increase of 70%. Simultaneously, China, taking advantage of low duty on silk fabrics, dumped it in Indian market at a price which did not cover even the cost of raw material consumed, what to speak of manufacturing cost & profit. China’s avowed aim was to capture world market of silk fabrics & it succeeded in this context to a large extent. Thousands of looms manufacturing silk fabrics in Varanasi & Bangaluru shut down & India was ousted from export market of silk fabrics.
The Govt. of India could not determine price of Chinese raw silk but it could mitigate the effect by reducing Custom Duty on it. This was ultimately done in Budget-2011. Price of Chinese raw silk came down to Rs.2300/- per Kg., due to appreciation in dollar price it has increased by another Rs.100/-.  At Rs.2400/-, it is 37% higher than price of January 2010. All-round production of sarees & fabrics using raw silk restarted. Varanasi Textile Industry which was collapsing, not only survived, but also got a new lease of life. Simultaneously, hundreds of Twisting Units also resumed work.
At the same time, duty-reduction removed many anomalies as under:-
  • Fraudulent advance licenses: Earlier over 90% import was done through duty – free advance licenses which were issued against commitment of export of silk fabrics. This not only deprived the exchequer of duty, but was grossly abused also. These were fraudulently issued to persons, who sold these at premium in open market & never fulfilled export commitments. A through probe should be instituted. With duty reduced to 5% this abuse has stopped & exchequer is now having 100% realization of 5% Duty.
  • Under invoicing: Regular importers were forced to under invoicing for saving duty to compete with duty – free imports. This practice is now wiped out.
  • Switch – over to synthetic yarn : With abnormal increase in Raw Silk prices, not only exports vanished, but domestic market also slumped due to very high cost. To reduce cost, weavers started switching over to synthetic yarn which would have resulted in Varanasi loosing its identity. With duty –reduction, this tendency has been checked and hopefully Varanasi will retain its identity.
Now the whole scenario has changed. Due to bumper crops & slackening demand, domestic raw silk prices are Rs.500/- per Kg. lower than imported raw silk, instead of Rs.200/- earlier. The two markets are no more interdependent, but are running independent of each other. Any increase in custom duty will not only result in increase of price of domestic raw silk but will also discourage weavers from its use at all. Even, import from China has also declined significantly.
The Central Silk Board has not been fully able to fulfill its objective of promoting sericulture by providing proper guidance, as there is capacity gap of around 10000 M.T. which has made the import of silk a necessity for the silk industry. The following are the main reasons for import:-
  • Our demand is app. 28000 M.T. while production is app. 18000 M.T. Varanasi alone consumed app. 20% of this.
  • We produce Multivoltine cocoons (more than 2 Crop a year) which is weak in strength than Chinese Bivoltine (2 crops a year) Raw Silk. It can not be used without twisting. Varanasi uses Chinese raw silk without twisting producing fabrics like Organza, Supernet Moonga Check etc. There is no alternative.
  • Our Reeling Machines are outdated & obsolete reel, it reels raw silk which is not uniform in denier.
Instead of demand in hike of import duty, all out efforts should be made by Central Silk Board and Seri culturists to enhance the production and quality as well and if the same is improved, it will put to an end to import of silk at all. Thus, focus should be on the above issues, instead of asking for increase in duty which is detrimental not only to weavers interest but also for domestic sericulture, as it will force the weavers to switch over to synthetic man-made fibers like Polyester, putting an end to use of raw silk and traditional handloom/ silk industry, especially Varanasi may loose its identity, which has checked to some extent due to reduction of import duty.

R.B.Verma                                                          G.K. Kedia
Dy. Senior Manager,                                            Convener
Udyog Bandhu                                                    Yarn Dev. Committee -
                                                                            Varanasi Vastra Udyog Sangh 

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