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Rebate Withdrawal Leaves Khadi Industry In Lurch

Updated: October 9, 2010 10:37 am

The withdrawal of 10 per cent rebate, which was given to the khadi industry around the year, and 20 per cent that was given for 108 days a year to mark the Gandhi Jayanti, which October 2, every year has left the local khadi industry in the lurch with many units facing an immediate closure.

                The union government had abruptly put an end to the rebate given to the khadi industry from April 1 onwards. The local industry, which was highly dependent on the rebate, has been hit the hardest by the decision.

                Many khadi and village industries in the country had provided employment to a considerable number of artisans. The latest move might render this workforce jobless in the near future.

                The rebate was the lifeline for the industry, as khadi clothes were being sold in the market at a discount of 30 per cent, the decision would push the industry further towards extinction as it had been already facing a resource crunch.

                It was quite unbecoming on the part of the union government to stop the rebate as this had been introduced to promote the khadi industry, which was endorsed by Mahatma Gandhi himself.

                At present, the government owes over Rs 450 crore to the khadi industry of the Haryana state as rebate, which has not been released despite repeated pleas. Even bank loans, which were earlier granted at an interest rate of 4 per cent, are now given at an interest rate of 12 per cent, which has made it altogether more difficult for the khadi units to survive.

                In the present scenario, where highly sophisticated industry units had taken over the major market shares, khadi could only be saved with immediate intervention of the government.

                Even the Congressmen have stopped wearing khadi now. Perhaps the latest move of the government will completely ruin the khadi industry, which at one point of time had played an important role in the country’s struggle for freedom.

                A strong appeal had already been put up before the union government and they could only hope for a positive response that would go a long way in safeguarding the interests of the khadi industry. Khadi Institutions are the implementing agencies forwarding rebate benefits directly to the consumers and generate employments.

                Two veteran Parliamentarians and political figures—Mulayam Singh Yadav (SP) and Lalu Prasad (RJD) raised the issue in the Lok Sabha as to how the withdrawal of rebate on Khadi during the period following Mahatma Gandhi’s birthday on October 2 will ruin cottage, village and khadi industries and destroy the unique symbol that India stands for and which the world has come to admire so much. The issue was raised by the two leaders separately during Zero Hour, enjoining upon the government to restore the subsidy and rebate that was given to khadi products. In a dramatic manner, Mulayam Singh showed to Speaker Meira Kumar a picture of the Mahatma weaving thread on a wheel, the Charkha, symbolising freedom, non-violence and self-reliance. The immortal Mahatma, who transcended time and space, used khadi to fight the tyranny of the machines deployed by the British in England to destroy the fine handicrafts of the colonised country. The destruction of handicrafts led to weavers being thrown back into agriculture, whose productivity was already low, resulting in de-industrialisation of India. Later, Lalu Prasad raised the issue again, saying that for many tribals in vast tracks of the land it was a source of livelihood. The leaders were unequivocal that cottage industries were the backbone of the Indian economy and need to be protected and nurtured, that 80 per cent of the rural populace consumes the hand-woven cloth and that it was during the rebate period that brisk sales of khadi and village industries products takes place. Seeing the agitated members, Minister of State for Parliamentary Affairs                   V Narayansamy said he will convey the feelings of the House to the Minister concerned.

                In order to promote market for khadi products, the government had continued through the Khadi and Village Industries Commission (KVIC) a policy of rebate on sale of khadi and khadi products till 2009-10. Normal rebate @10 per cent of sales used to be given throughout the year whereas a special rebate of additional 10 per cent used to be given for 108 days in a year coinciding with Gandhi Jayanti and/or local festivals.

                However, on the recommendations of expert committee and after trying several pilot projects and extensive consultations with stakeholders, the government has introduced a more flexible scheme, namely, Market Development Assistance (MDA) Scheme on production of khadi in place of existing scheme of Rebate on sales with effect from April 1, 2010, for implementation by KVIC during 2010-11 and 2011-12. The scheme envisages financial assistance @ 20 per cent of production value on khadi and polyvastra which will be shared among artisans, producing institutions and selling institutions in the ratio 25:30:45. Under the new system of MDA, sales are expected to be evenly spread throughout the year, the institutions will have the flexibility to use the assistance in improving the outlets, products, giving incentive to customers, etc.        The total number of workers in the khadi and village Industries sector as per data compiled by KVIC, is about 1.08 crore including an estimated 9.81 lakh artisans alone in the khadi sub-sector.

                The erstwhile scheme of rebate on sales caused delay in paying incentives to the institutions in the sense that they would have to wait till sale and wait till next year to get the claims reimbursed. Under MDA, incentive would be provided immediately after production of the items and this is expected to ease out the working capital situation of the institutions by ensuring immediate liquidity which would in turn ensure timely payment to the artisans. The newly introduced MDA scheme has a provision of sharing 25 per cent of the assistance (MDA) with the artisans as incentive or bonus in addition to their wages through their bank accounts or post office accounts. With these measures, the sector is expected to grow at a faster pace ultimately benefiting the artisans.

                For the development of khadi sector, the government, through KVIC, has introduced several other new schemes, in addition to MDA scheme for khadi and polyvastra, namely, “Workshed Scheme for Khadi Artisans” for providing assistance for construction of worksheds for better work environment and the “Scheme for enhancing productivity and competitiveness of Khadi Industries and Artisans” to assist 200 khadi institutions to make khadi industry competitive with more market driven and profitable production by replacement of obsolete and old machinery and equipment and “Strengthening of Infrastructure of existing Weak Khadi Institutions and Assistance for Marketing Infrastructure” which includes strengthening of infrastructure of existing 100 weak selected khadi institutions. Besides, the recently introduced Khadi Reforms and Development Programme funded by the Asian Development Bank also provides for revitalisation of khadi sector through measures which, inter alia, include enhanced employment and earnings of the artisans through their capacity building and empowerment.

                This information was given by the Minister of State (Independent Charge) for Micro, Small and Medium Enterprises, Mr Dinsha Patel in a written reply to a question in the Rajya Sabha on July 30, 2010.

By Naresh Kadyan

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