Textile traders and cotton farmers say they’re suffering unprecedented losses. Such a crisis could have far-reaching consequences for a State half whose population is linked to textiles. 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. With the Assembly polls scheduled in Gujarat later this year, A.M. Jigeesh explores whether this financial adversity could have political repercussions.
During his protest, which lasted 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 organized a rally of two lakh people in Surat and 1.5 lacks 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 traveled around the State, traders associated with this industry talked about a decrease in exports, an increase in the cotton rate, and rising costs of power and chemicals pushing up the production costs while the sales 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 before the Assembly polls, all three big political parties in Gujarat — the BJP, the Congress, and AAP — closely monitor the developments unfolding in this sector. While a senior BJP leader said he hoped the Centre would 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 would 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, and selling the finished product. Nearly 80% of farmers in Saurashtra and central Gujarat cultivate cotton. The State’s farmer leaders say almost half of Gujarat’s population is linked with cotton farming. 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 appease their anger. Despite this, Congress improved its tally in the Assembly polls, among other things, riding the wave of unrest among the cotton farmers. The party improved its performance in 2017 by winning 77 seats, 16 more than 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 that have faced huge losses in business and employment. Going into the elections, AAP is trying to position itself as an urban-centric movement that 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 mechanized, Surat’s per day cloth production has increased from 2.5 to 4 crore meters. However, the demand has stagnated at 2.5 crore meters due to the overall slump in the market, say traders. “Surat used to handle stitching works worth ₹15 crores daily. 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 laborers for big traders. The market could never recover from demonetization 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 again using whatever money they made over the previous season tto sow cotton. “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 the ack 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 MSP fluctuations impact 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, almost double the MSP. We 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 cotton rate has doubled in the last two years. “We are engaging 2,000 spinners and weaver families in 45 villages. WeWe aim to attract the youth towards khadi and create more employment in the sector. But the increase in the cotton rate 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 year. Mr. Joshi shut down a fabric printing unit 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 canceled or postponed,” says Mr. Khachariya. Another reason for the slump in business is the increase in the price of cotton. “Cotton prices have risen to ₹1 lakh for a candy [approximately 356 kg]. As a result, one meter of cotton cloth, priced at ₹20 a year ago, is now selling at ₹32. Also, due to the situation in Ukraine, raw materials such as colors and chemicals have become costlier,” Mr. Khachariya says. Due to the absence 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. He says that this has pushed our customers away and directly impacted our business by about 70%,” he says.
Unkept promises
Ahead of the 2017 Assembly election, among the trader bodies that Jaitley met to appease their anger against the GST were the Federation of Surat Textile TTradersAssociation (FOSTTA) representatives, 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, 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 tax increase will further harm the business. COVID-19 has already hit production. 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 production stage 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 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), 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 toward 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 the GST was a much-needed financial reform at the time of its introduction. 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 organize the entire textile industry. But that is not what has happened,” he says. “Our input costs have increased due to several factors. The yarn prices fluctuate on an hourly basis. In the end, the consumer is being looted,” adds Mr. Jirawala.
South Gujarat Textile Processors Association president Jitendra Vakharia represents over 400 processing houses in various government panels, almost all 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 was the peak season for the processing units to finish orders 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 problem that hit the textile market in 2008, when Gujarat, among other industrial hubs, was struck 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. The Centre always comes up with beneficial schemes for farmers and industrialists. I am sure that the Central government will consider any other issues, including the continuation of the textile upgradation fund. 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 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. Each value addition work is done at various units, and taxes are charged at each stage. The Congress will review the tax structure and electricity duty as millions work 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.
