Garment Manufacturing Opportunities in Karnataka Jan2020

Karnataka: The Garment Capital of India

Overview of State

Karnataka, located in south western region and known for its culture and heritage, is the 6th largest state of India. The state is home to ~62 million people spread across 30 districts. Karnataka is well connected to all major markets with two international airports, ~307,000 km of road network and ~5,500 km of rail network. The state has a coastline of 300 km with 12 minor ports and one major port in Mangaluru.

Bengaluru, the capital & largest city of state is the center of India’s high-tech industry. Over the years, the state has successfully established itself as a continuously growing multi-industry state. Some of the major industries in the state include Information Technology (IT), Bio-tech, pharmaceuticals, aerospace products and textile & apparel manufacturing.

Textile & Apparel Industry of State

The state has presence in complete textile value chain starting from production of fibre to manufacturing of garment and other finished consumer products. The state contributes 49% to mulberry silk production, 12% to wool production and 6% to cotton production in the country. There are 17 spinning mills in the state with a total capacity of ~3.6 lakh spindles. The weaving industry of state comprises of 40,000 handloom weavers and 1,20,000 powerlooms. The state’s performance in apparel industry has been so successful that it is often called the “Garment Capital of India”.

Bengaluru is the largest garment manufacturing cluster with ~400 garmenting units and hosts several large scale garment companies such as Shahi Exports, Laguna Clothing, Raymond, Madura Garments, etc. The state has well-established textile parks situated at Doddaballapura, Mundargi, Karur, Hassan and Gulbarga area with some pipeline projects in Belgaum, Chamrajnagar, Chickballapur, Mysore Silk Park and Boregaon KSSIDC.

Policy Thrust to State’s Textile & Apparel Industry

Realizing the success of Karnataka’s previous policy “Nuthana Javeli Neethi 2013-18” that fetched investment of Rs. ~9,600 crores and created employment for almost 2 lakh people, the Karnataka government has released their new policy “The New Textile and Garment Policy 2019-24”. The new policy aims to generate employment for 5 lakh people and attract investment worth Rs. 10,000 crores in the period of next 5 years.

Some of the salient features of new policy are as follows:

• The policy focuses on strengthening the upstream textile industry and focuses on spinning, weaving, integrated, processing and technical textiles as thrust sectors.

• The incentives range from 40% to 55% of project cost in which capital subsidy is the major component (15%-30%) followed by interest subsidy, power subsidy, wage & training subsidy, etc.

• Special case to case incentive packages are offered to encourage the establishment of Mega textile & apparel units (investment of >Rs. 200 crore) in the state.

• The policy favors the northern districts of state but excludes the rural and urban Bangalore districts from most of the incentives.

Under the New Textile & Apparel Policy, the state has been divided in 4 Zones:

The fiscal incentives available for garment units are tabulated below:

* Fixed asset/ project cost: Factory building, Infrastructure including land cost (other than land development), Plant & Machinery, ETP and other productive assets with transportation, erection and electrification and construction of housing/ dormitories by themselves (for up to 50% of their workers/ employees).

Policy Benefits for the Apparel Industry Investors

As per the incentives under New Textile & Apparel Policy, the below tables illustrate the incentives an investor can gain by establishing a garment unit with 500 sewing machines in Zone 1:

As per the above mentioned incentives, a 500 sewing machine garment unit in Zone-1 may avail incentives up to 50% of the Fixed Capital Investment (FCI) over a course of 5 years.

Note: The above subsidy calculation for garment factory has been done considering a standard garment business plan with industrial sewing machines

In order to create an internationally competitive textile and apparel industry, the Karnataka state government has been pro-actively supporting the textile and apparel industry in the state. The New Textile & Apparel policy is one of state’s initiative to attract investment from potential investors for strengthening the upstream textile industry and maintain its hard earned title of “Garment Capital of India”.

This article has been authored by Ayushi Puri, Consultant and Vijay Gupta, Associate Consultant.