Hank Yarn Diversion to the Powerloom Sector and Analysis of Yarn Price Fluctuations
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HANK YARN DIVERSION TO THE POWERLOOM SECTOR AND ANALYSIS OF YARN PRICE FLUCTUATIONS May, 1992 of Public n..,.... NIPFP Library 42451 N E W p E ^ ^ J 338.47677 N21HN2;1 Submitted to Office of the Development Commissioner (Handlooms) Ministry of Textiles, Government of India, New Delhi. NATIONAL INSTITUTE OF PUBLIC FINANCE AND POLICY NEW DELHI 1 > Z 9 - N 0-1 1-4 N "i- Study Taaa Project Ludtr : Dr. A.V.L. Narayana (Sanior Sconoaiat) Junior Rasaarch Associate* : Mr. H.K. Amar Nath Ms. Shalini Singh laisarcb Xnvastigator* : Mr. Bhagwati Prasad ta. Milind Saxena Consultant : Dr. Murali Patibandla Temporary Research Invasti (Stata-wisa) Andhra Pradash Mr. P.V. Subba Raddy Mr. P. Shiveankar Naidu Mr. M. Nagaraju Taail Nadu Mr. V. Nachi Muthu Me. M. Radha Mr. Sali Kumar Maharashtra Mrs. P.N. Sirpurkar Mr. C.L. Chattrapal Oriasa Mr. Debakanta Ranungo Mr. Shashikant Patnaik Mr. Narendra Kumar Bahera Mr. Sachidananda Baxi Wast Bengal Mr. Niladri Sakhar Mukharj Mr. Subrota Kumar Roy Mr. Bhaskar Datta Mr. Gautam Bhattacharya Mr. Gautam Pramanik CONTENTS Preface i Acknowledgments ii List of Tables iv List of Figures vi List of Tables in the Appendix vii Executive Summary viii 1. Introduction and Salient Features 1 2. Estimation of Hank Yarn Diversion 31 3. Analysis of Yarn Price Fluctuations 73 4. Summary of Findings and Policy Suggestions 120 REFERENCES 140 ANNEXURES 1. Household Questionnaire 142 2. Cooperative Societies Questionnaire 148 3. Traders Questionnaire 152 APPENDICES 1. Details of S^mpla Survey 153 2. Micro Level Estimates of Hank Yarn Diversion 159 3. A Note on Handloom Industry in Vest Bengal 174 PREFACE The National Institute of Public Finance and Policy is an autonomous non-profit organisation established for carrying out research, undertaking consultancy work and imparting training in the field of public finance and policy. The present study of handlooms focussed, mainly, on the following important issues, viz., (i) problem of hank yarn diversion to powerloom units and (ii) the factors influencing hank yarn prices and its distribution to individual weavers. The study was commissioned at the Institute in September, 1990 by the Office of the Development Commissioner (Handlooms), Ministry of Textiles, Government of India. Dr. A.V.L. Narayana, Senior Economist at the Institute conducted the study and prepared this report. The Government of India has accorded a high degree of protection to the handloom industry through various fiscal means including concessional excise duty on hank yarn and a consumer subsidy for promoting the demand for handloom fabrics. One of the important objectives of Government intervention is to supply hank yarn to handloom weavers at reasonable prices. An analysis of the impact of the excise concessions on the use of hank yarn is, therefore, of much significance for the purpose of policy making. This study analyses this issue as also the problem of price fluctuations and distribution of hank yarn. A sample survey consisting of handloom weavers, cooperative societies and yarn traders was conducted on an all-India basis in major handloom-powerloom concentrations. It is hoped that the findings of this painstaking study would be of relevance to policy makers and interest a wider audience. The Governing Body of the Institute does not take any responsibility for the views expressed in this report. That responsibility belongs primarily to the study team and the Director. Raja J. Chelliah Honorary Director. ACKNOWLEDGMENTS This handloom study was commissioned by the Office of the Development Commissioner (Handlooms), Ministry of Textiles. Apart from financial support, the DCH and its officials extended their help and cooperation at every stage, but for which it would not have been possible to carry out this study successfully. The study team is particularly grateful to Shri Ravi Mathur, Development Commissioner (Handlooms), and Shri Thiruvenkat, Assistant Director, DCH office for taking keen interest in the study and helping us to obtain essential information from States and also for the useful discussions held and statistical data provided for the study from their New Delhi office. Thanks are due to various State Government officials of the Directorates of Handlooms and Textiles for their kind cooperation and statistical information regarding the district- wise, weavers' concentrations in the States surveyed by our study team. Thanks are also due to handloom and powerloom associations, weavers' cooperative societies, individual households and master weavers who had extended their invaluable cooperation by participating in the sample survey and responding to our personal interviews during the course of the study. In evolving the conceptual framework of the study and strengthening its theoretical base, we received help from professional colleagues in the Institute and also outsiders. The study team is particularly indebted to Dr. Raja J. Chelliah, Professor Emeritus, Dr. A. Bagchi and Prof. Mihir K. Rakshit for providing insight into the study in general, and for the policy discussions held at various stages of the study in particular. Prof. Rakshit has spared his valuable time for critically examining yarn price fluctuations as well as methodologies for estimating the diversion of hank yarn to the powerloom sector, in particular. It is my duty to place on record my special thanks to Prof. Rakshit for providing constant encouragement and help which has enabled me to conduct the price analysis in this study. I am also grateful to Prof. Avani Bhat of Jawaharlal Nehru University for his academic interaction and discussions at various stages in designing the survey of Handloom weavers, Cooperative societies and Powerloom associations in this study. I have also had the benefit of useful discussions with Dr. Govindarajulu, Department of Statistics, Bharatiyar University, Coimbatore, regarding the methodology for estimating hank yarn diversion. Prof. R.J. Chelliah systematically reviewed the manuscript for revision. I am thankful to them for the same. At the Institute, Shri Amar Nath, H.K. and Ms. Shalini Singh, Junior Research Associates, and Shri Milind Saxena and Shri Bhagwati Prasad, Research Investigators helped in conducting the sample survey in U.P. and Delhi as also in computerisation of ii the data and its processing and in the final statistical tables. Shri Anar Nath has contributed significantly in the collection of data from the State Handloom Directorates situated in Delhi, Kanpur, Hyderabad, Bangalore and Madras. He also administered the sample survey and conducted detailed discussions with concerned handloom and powerloom societies in various parts of U.P, A.P, Karnataka and Madras for the study. This project would not have been completed but for his cooperation and dedication to the work. Dr. Murali Patibandla was involved in the preparation of an earlier draft on the analysis of price fluctuations. He also visited State Handloom Directorates and helped in conducting a sample survey in Delhi, Hyderabad and partly Madras. In addition, research assistance was provided by a number of field investigators appointed locally for the purpose of sample survey in Andhra Pradesh, Tamil Nadu, Maharashtra, Orissa and West Bengal. I am grateful to all of them and in particular to Shri jGautam Bhattacharya who prepared an earlier draft of Appendix A. 3 on 'Handloom Industry in West Bengal*. Shri V. Uma Shankar has not only provided excellent word processing and data processing support but also helped me in coordination of the project related activities, while the EDP staff at our Computer Centre has constantly kept up with our demands for terminal time. Mrs. Rita Wadhwa's editorial assistance has added value to the report. Mr. N. Natarajan has ably coordinated reproduction of the report. I am grateful to all of them for the cooperation. A.V.L. Narayana Leader of the Study Team ill LIST 07 TABLES State-wise Details of Handlooms and Powerlooms in 5 the Decentralised Sector. State-wise Number of Handlooms in India and their 8 Co-operative Coverage as on 30.06.1990. Working Status of Full time HandloOm Weavers. 10 State-wise Percentage Distribution of Working Status 11 of Handloom Weavers. Frequency Distribution of Spinning Mills by Type 14 of Ownership. Hank Yarn Production by Ownership of Spinning Mills 14 (1986-87). Production of Hank/Cone Yarn - Count Group-wise 17 Details During 1981-82 to 1988-89. State-wise Hank Yarn Sales by Cooperative Spinning 19 Mills during 1989-90. State-wise Cone Yarn Sales by Cooperative Spinning 22 Mills during 1989-90. Per Capita Consumption of Cotton Cloth by Sector 25 of Manufacturing, 1982-88. Pattern of Domestic Aggregate Consumption of Cotton 27 Cloth by Sector of Manufacturing in India. Cotton Cloth Production by Sector of Manufacturing 28 in India. Per Capita Textile Consumption by Sector of 37 Manufacturing, 1988. Per Capita Textile Consumption by Sector of 38 Manufacturing, 1987. Aggregate Consumption of Selected Cotton Textile 39 Items for Urban and Rural India, 1987 and 1988. Consumption of Selected Items of Powerloom Cloth in 40 India in which Hank Yarn is used. Exports of Cotton Textile Items Produced Largely 42 on Powerlooms by using Hank Yarn. iv 2.6. Exports of Handloom Fabrics from India during 44 1988-89 and 1987-88. 2.7. Macro Estimate of Hank Yarn Consumption by Powerloom 47 Sector 1988-89: Variant - I. 2.8 Macro Estimate of Hank Yarn Consumption by Powerloom 49 Sector 1988-89: Variant - II. 2.9 Hank Yarn Consumption by Powerloom Units in Selected 54 States: Micro Level Estimates, 1989-90. 2.10 Prices of Hank-to-Spool Winding Machines. 59 2.11 Changes in Excise Duty Differential Between Hank and 62 Cone Yarn, 1988 and 1990, 2.12 Changes in Excise Duty and Prices of Cotton Hank 64 Yarn for Co-operative Societies, 1988 and 1990. 2.13 Changes in Excise Duty and Prices of Cotton Cone 65 Yarn, 1988 and 1990.- 2.14 Price Difference Between Cone and Hank Yarn before 67 and after Duty, 1988 and 1990.