The year’s most busy days are here. How many weddings do you have invitations to? Undecided about which sari, gown or skirt, or kurta, shirt or tie to buy? Before you go shopping, let us tell you that irrespective of whether you opt for traditional or western wear, odds are high of it having a generous amount of silk, that too, Chinese silk. Surprised? So, were we and hence decided to make a trip to where else but Varanasi.
That impeccable look
Post-election Varanasi is back to being the spiritual capital of India. Political rhetoric has subsided and people can be seen soaking in the mesmerising Ganga Aarti like before. But just when one was getting into the spirit of one of the world’s oldest cities, one is reminded of the reason for being in Varanasi – business, the business of silk. For, who hasn’t heard of Banarasi silk saris – now a geographical indication – and what better place could one find to understand the business of silk.
Today, both traditional and ramp-designed saris are manufactured in Varanasi. And apart from Indian silk, a large chunk of the weavers/ manufactures use silk imported from China. In fact, despite being the second biggest producer, India is the world’s biggest importer of silk. Wondering what we do with so much silk? Well, look no further beyond the six-yard saris and sherwanis that make Indian women and men look all the more beautiful and handsome. Speaking about this, Viresh Shah, whose company Jagadish Das & Co. (JDS) is involved in the business of silk saris for almost hundred years told The Dollar Business, “Indian women still prefer to wear pure silk. When it comes to Varanasi, women want nothing but pure Banarasi silk sari. Hence, we do not use any synthetic yarn.” But why silk from China? What’s special about Chinese silk? The answer lies in the fact that Chinese silk is bivoltine, which means only two crops are harvested in a year, unlike Indian silk, which is multivoltine. This makes Chinese silk stronger and can be used in power looms, unlike Indian silk which can only be used in handlooms. “Chinese silk is more durable and the quality is superior. This is why we prefer Chinese yarn over Indian yarn,” Shah summed up.
Mired in politics
As per Ministry of Commerce, in FY2014 India imported over 3,259 MT raw silk (most of it mulberry), valued at close to $150 million. And more than 98% of this was sourced from China. But all’s not smooth (pun intended) about India’s silk imports. Not only are imports falling – down over 60% (volume terms) from the FY2009 highs – primary because of the levy of anti-dumping duty (that was effective till January 2014) with a reference price of $37.32/kg, but also a hike in basic import duty from 5% to 15% in FY2010.
The price of a Banarasi silk sari can run into lakhs and is a prized possession of every Indian woman
Hurting a million
Such constant in-fighting and political meddling means while India’s silk industry’s products are aspirational, its own health is anything but inspirational. Shah feels high basic import duty and anti-dumping duty has played havoc on the lives of weavers. “While 10 years ago, Varanasi’s silk industry supported over 10 lakh people, the number has now fallen to just 30,000-35,000, all thanks to high yarn prices.” Shah rued and added, “The government is not doing much. If we didn’t have these duties, the scenario would have been very different.”
Expensive silk yarn has also forced weavers to seek alternatives, which saw the introduction of synthetic yarn. But not many are fans of synthetic yarn, at least not in Varanasi. “Bad money drives good money out of circulation. Similarly, synthetic materials have driven out pure silk from the market,” added Kapoor.
Traditional silk handlooms usually take two-three months to weave a silk sari
However, despite such perennial squabbling, two things about India’s silk industry are given – firstly, demand for silk products is insatiable and secondly, given the state of domestic production, imports will continue to remain high, with or without high import and anti-dumping duties. And herein lies a massive opportunity for importers. For, Varanasi has given its verdict – it won’t compromise on quality.
Atul Kumar Gupta, Chairman, The Indian Silk Export Promotion Council"Local producers do not know what anti-dumping duty is. Hence, I don’t know why they ask for it"
TDB: Local silk producers, however, have always favoured anti-dumping duty. What’s your take on this? AKG: Local producers do not know what anti-dumping duty is. Hence, I don’t know why they ask for it. When they are getting the same prices as the Chinese, despite Chinese quality being much superior, where does the question of anti-dumping come from? There is such a huge demand for silk in the domestic market that whatever they produce, they manage to sell at whatever prices they want. So, I don’t understand the logic behind their demand for anti-dumping duty. TDB: How do you think local production can be increased? AKG: Honestly, nobody is paying any attention to this industry. There are two things – R&D and processing houses. Italy sells the best quality of silk products, from silk imported from India and China. They only process at their end. On the other hand, in India, I don’t think we should do R&D on cocoons or weaving, which takes two-three decades. R&D is required at the base level, as per interactions between buyers and sellers. Based on the requirement, we need to do R&D on our end and leveraging on that we should offer new products. The more number of new products we offer, the more competitive we become in the market. Today, we are simply making silk georgette, chiffon, scrapes and satin – the same things we used to produce 30 years ago. Secondly, we don’t have processing houses all over India. There are only a few processing houses which are owned by big silk producing houses and are not accessible to everyone. Silk is still an unorganised sector in India. TDB: What is Ministry of Textiles doing about this? AKG: Ministry of Textiles says it’s Central Silk Board’s (CSB) job, but the board itself is a part of the ministry. The need of the hour is that the government help us financially so that we can invest in R&D and create new products, thereby adding value to India’s silk exports. TDB: What kind of duty drawbacks do you get for exporting finished goods? AKG: Duty drawback, on an average, is about 8%, but is subject to unreasonable value caps. For example, let’s talk about a garment that uses four meters of satin silk. Currently, satin silk is quoting at Rs.800-900 per meter. So, if I take price from the lower cap, silk worth Rs.3,200 is being used in that garment, but duty refund is only Rs.80-90. Rs.90 against Rs.3,200 – calculate the percentages! TDB: As Chairman of The Indian Silk Export Promotion Council, what are your expectations from the new government? AKG: I would want the government to lower import duty on silk and not add the burden of anti-dumping duty. The government should itself invest and give incentives to those who come forward to set up processing houses. The government should provide interest free loans or loans at very nominal rates of interest for the long term, like 20 years or so, to help import plants and machinery. Similarly, Ministry of Textiles should provide duty credit scrip of 5% to help fund R&D. Lastly, the government should try and promote the Indian Silk brand, since the private sector doesn’t have the capacity to advertise abroad.
Vaibhav Kapoor, partner, Satyapal Kapoor & Sons[/caption]
TDB: Why is India the world’s largest raw silk importer, despite it being the 2nd biggest producer?
Vaibhav Kapoor (VK): Although we are the world’s second largest silk producer, we are its biggest consumer too. Secondly, the silk, which is produced in India, is multivoltine. This means three-four crops are harvested in a year. On the other hand, Chinese silk is bivoltine, i.e., only two crops are harvested in a year. And yarn made of bivoltine crop is much stronger than its multivoltine peers. Moreover, in eastern Uttar Pradesh, we mostly use the yarn as it is, while in Bangalore they use twisted yarn. Hence, we cannot use Indian silk here. Although there have been attempts to develop bivoltine crop in India in the past few years, and some good quality crop has come up, there is no consistency and even the output is very low as compared to that of China. Hence, we are compelled to depend on imports. I would also like to add that this import is in no way harmful for the country since we use it to manufacture value-added products, which are then exported.
TDB: Tell us how anti-dumping duty is affecting the industry.
VK: There is a lot of policy play here. The government has divided the industry into north and south lobbies. The weaving community believes that we should pay less import duty or zero duty because ultimately we need raw silk. But the government is somehow under an impression that high duty will help Indian farmers. China does not dump in India. In fact, there is no dumping from anywhere. We require it so we import it. Our trade association has always opposed anti-dumping duty on raw silk, but we support the duty on silk fabric.
TDB: What do you mean by policy play? Can you explain in detail?
VK: The policy related issues began in 1996-97, when H. D. Deve Gowda was the Prime minister. He was from the silk rearing belt and so, just to appease his vote bank, he increased the import duty on raw silk. After a few years, even anti-dumping was proposed and notified. Later, during Atal Bihari Vajpayee’s regime, this issue was brought to the notice of the government, and there some relief too. In FY2009-10, Natural Fibre Policy was being formulated, wherein there was a sub-group for silk. During the discussions, apart from me, two-three more people represented Varanasi. Couple of meetings were held. There was an understanding that import duty would be gradually reduced from 30% to 20%, followed by 5% reductions each year. This, to ensure the negative impact wouldn’t hit the southern lobby too much. But politics played spoilsport. Some people pressurised Rahul Gandhi to intervene and instead of a gradual reduction the UPA government drastically reduced the import duty on raw silk to 5%.
"The government raised the import duty on Silk even before industry could get into full momentum"
The sudden and drastic reduction saw the south lobby up in arms and hence, within a year, the import duty was raised to 15%. Low import duty gave a boost to the weaving industry, but before the industry could gain momentum, the government raised it. One should note that high duty leads to malpractices such as under-invoicing, smuggling etc. Nobody thinks of malpractices at lower duties, but once it becomes too high people start cheating. Policy play has also brought in a lot of volatility in the sector. With high duties, prices have risen and weavers have been forced to look for alternatives such as polyester yarn. When anti-dumping duty was imposed silk price were in the range of $12-14 per kg, which has now reached $45-47 per kg. TDB: What kind of role does Central Silk Board play in this sector? VK: 90% of Central Silk Board’s work is in the pre-cocoon sector (the farmer sector). But changes in the sericulture industry can only be observed over a span of time, since climatic conditions also play a major role. Even China had to overcome similar issues, before becoming a major player in this sector. The fear, however, is that by the time we become a yarn producing country, we will miss the opportunity of being a textile producing country. Unfortunately, in between all this policy play, the government hasn’t been able to decide whether India should be a raw material producing country or a finished goods producing country. TDB: Your MP is the Prime Minister of India. So, what are your expectations from him? VK: We have spoken to Minister of State for Textiles on these issues and he has assured us of looking into the matter. The problem, though, is the south lobby. We want duty on raw silk to be brought down to 5%, which will make things easier for traders and weavers. It will also remove trade irregularities. Neat and clean business is good for everyone. If this is done, price volatility will only be a function of China and the forex market.Copyright @2024 The Dollar Business. All rights reserved.
