Lok Sabha Question No. 5756 (UNSTARRED), answered on 2017-04-10
Subject: Study on Khadi Industries
Ministry: MICRO,SMALL AND MEDIUM ENTERPRISES
Asked by: Pratyusha Rajeshwari Singh

## GOVERNMENT OF INDIA MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES

## LOK SABHA UNSTARRED QUESTION NO. 5756 TO BE ANSWERED ON 10.04.2017

## STUDY ON KHADI INDUSTRIES

## 5756.  SHRIMATI PRATYUSHA RAJESHWARI SINGH:

Will the Minister of MICRO, SMALL AND MEDIUM ENTERPRISES be pleased to state:

- (a) whether the Government has undertaken any study on the Khadi industries in the country particularly in Odisha;
- (b) if so, the details thereof and the outcome thereof;
- (c) whether  the  Government  proposes  to  wind  up  any  unit  or  industry  in  Khadi sector in Odisha; and
- (d) if so, the details thereof and the reasons therefor?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES (SHRI GIRIRAJ SINGH)

(a)&(b): Yes, Madam. The Central Government had constituted Committees to review  the  existing  structure,  functioning  and  performance  of  Khadi  Village  and Industries Commission(KVIC) to study the regulatory framework and to recommend any  other  measures  considered  necessary  to  revamp  the  KVIC.    Based  on  the recommendations of the Committees, the organisation structure and programmes  of KVIC  have  been  revamped.  These  studies  were  conducted  for  the  entire  country including the State of Odisha.

The  details  of  the  various  Committees  and  their  recommendations  and  the changes made are at Annexure.

- (c): There is  no  proposal  for  winding  up  any  unit  of  industry  in  Khadi  Sector  in Odisha.
- (d): Doesn't arise.

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High  Power  Committee  (HPC)  was  constituted  under  the  Chairmanship  of  late  Prime Minister  Mr.  P.  V.  Narasimha  Rao  to  review  the  performance,  examine  the  issues  and identify the problems faced by the KVI sector.

## The Committee in its report submitted in 1994 made various recommendations. The key recommendations of the Committee were:

-  All  apex  financing  Institutions  and  commercial  banks  to  be  advised  to  increase  the flow of institutional credit to the KVI sector.
-  Rebate  for  Khadi  may  be  replaced  by  'Market  Development  Assistance'  (MDA), calculated at 20% of production;
-  Necessary  legislative  measures  to  protect  'Khadi'  and  its  use  by  KVIC  certified Institutions;
-  Separate wing in KVIC to supervise the working of Sliver Plants; smaller economical sliver plants to be set up at the Institutional level;
-  Village  industries  under  the  purview  of  KVIC  to  be  considered  on  par  with Government level village  and  small  industries  category  for  planning  and  development purposes.
-  Government to constitute a separate fund (Rs. 2000 crore) for rural industries to be administered by NABARD or a separate financial institution.
-  Focus on select industries for development where KVIC has expertise and experience;
-  Development  of  the  export  capability  of  KVI  Institutions;  strengthening  quality control, augmenting training (participatory funding scheme for KVIB and NGO run new training centres) and research facilities;
-  Creation of a special cell at the KVIC headquarters to oversee and monitor the KVI programmes;
-  Transition to Project Approach for financing (from Pattern Approach);
-  Commission to delegate day to day functions to the CEO and Financial Advisor and focus on developmental rather than regulatory activity;
-  Measures for strengthening of KVIBs

## Based  on  the  recommendations  of  the  High  Power  Committee  the  following  changes were brought in the KVI Sector:

-  The REGP scheme was commissioned in 1995-96 with the objective of providing a formal channel for flow of funds from banking institutions to the KVI sector.
-  The Government of India framed a new scheme for KVIC to take online credit facility (Consortium of Bank Credit or 'CBC') of Rs. 1000 crore.
- I. Arthur Andersen study was commissioned in the  year 2000  with the objective of reorganizing the KVIC organization structure with respect to the changing business needs and overall objectives of the KVIC.

## The Committee in its report made various recommendations. The key recommendations of the Committee were:

-  Redefinition of 'Commission' under the KVIC act, 1956 in line with change from an operational body to policy formulation body.
-  At the Commission level, the KVIC to not only comprise representatives of the KVI sector but the officers of the KVIC to also participate in its policy making and, therefore, the  CEO,  FA  and  the  heads  of  Khadi  and  VI  departments  to  be  appointed  as  voting members of the Commission.
-  At the operational level, KVIC to structure itself into separate business units to meet the distinct requirements of Khadi and Village Industries.
-  The  roles  and  responsibilities  of  internal  functions,  such  as  Capacity  Building, Marketing & Sales, Research  & Development, Human Resources, Finance, etc, which are integral to the organization's performance, to be defined and communicated clearly.
-  KVIC should set up industrial clusters catering to a groups of skilled artisans at the district/block level

## Based on the recommendations of the Arthur Andersen study the CEO and FA were made ex-officio members of the Commission and voting rights were also conferred.

- II. Ministry  constituted  Expert  Committee  under  the  Chairmanship  of  Mr.  D.M. Sukthankar,  former  Chief  Secretary  Govt.  of  Maharashtra,  in  2005  to  review  the existing structure, functioning and performance  of  KVIC  to  study the regulatory framework  and  to  recommend  any  other  measures  considered  necessary  to  revamp  the KVIC.

## The Committee in its report submitted in March, 2005 made various recommendations. The key recommendations of the Committee were:

-  Need  for  identification  of  select  traditional  and  sunrise  industries  as  focus  areas;  a cluster-based approach to revival of traditional industries;
-  Recognize  technological  up-gradation  and  modernization  as  a  priority  area  for transforming  the  sector;  suggested  mobilization  of  existing  technical  and  scientific Institutions, such as, ITIs, Engineering Colleges, IITs, CSIR  as resource/contact Institutions for rural industrialization and creation of venture capital fund within KVI;
-  Recommended  brand  building,  standardization  and  quality  control  for  products  of KVI Sector;
-  Address  the  organizational  and  training  issues  preventing  the  growth  of  the  KVI sector and suggested setting up of Zonal Committees and Zonal offices under a Deputy CEO, and restructuring of training programme aimed towards entrepreneurial development;
-  Commented  on  issues  related  to  Khadi  Institutions,  namely,  dues  on  account  of Rebate, stock pile-up and state of implements; Suggested alternatives to Rebate
-  direct subsidization of spinners
-  encouraging  entrepreneurship  among  spinners/weavers  through  formation  of Self Help Groups
-  Governance related recommendations

## Based  on  the  recommendations  of  the  Expert  Committee  the  following  changes  were brought in the KVI Sector:

-  Introduced Scheme of Fund for Regeneration of Traditional Industries (SFURTI) to organize the traditional industries and artisans into clusters to make them competitive and provide support for their long term sustainability and economy of scale.
-  KVIC  took  up  several  projects  under  an  interface  with  reputed  Technological institutions  viz.  IITs  and  NITs  for  developing  new  technologies  and  their  subsequent dissemination among institutions and entrepreneurs of KVI Sector.
-  KVIC  have  introduced  'Khadi  Mark'  to  ensure  genuineness  of  Khadi  to  the customers.
-  Zonal  Committees  have  been  constituted  for  each  of  six  geographical  zones  to monitor  timely  implementation  of  KVI  programmes/schemes  for  the  development  of Khadi and Village Industries in the zone.
-  The Ministry of MSME has revised the negative list and brought in a large number of new industries/projects like spinning and weaving, solar charkhas hand loom/power looms under the ambit of Prime Minister's Employment Generation Programme (PMEGP).
-  Government  of  India  introduced  the  scheme  of  Market  Development  Assistance (MDA) on Production in place of rebate after experimenting with several pilot schemes. The  scheme  has  been  given  effect  from  1 st April  2010,  to  help  Khadi  institutions  to reorient their activities extending adequate emphasis towards increasing artisans' earnings as well as ensuring quality of Khadi to customers. Under MDA scheme 25% of assistance is  earmarked  for  payment  among  spinners  and  weavers  as  additional  incentive  through their bank/post office account.
-  An online application system has been made operational for disbursement of Market Development  Assistance  (MDA)  and  Interest  Subsidy  under  ISEC  scheme  to  KIs  and artisans as applicable.
-  Under PMEGP, online  disbursement  of  MM  subsidy  through  single  National  level nodal bank has been developed.

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