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February 18, 1999


Politics infects import-hit silk business in Karnataka

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A Special Correspondent in Bangalore

The Union government's decision to permit import of raw silk is getting controversial with the imported material not meeting the required quality specifications.

Tests conducted at the research laboratory of the Central Silk Board have proved that the imported silk, already released by the customs to some big-time special import licence-holders, does not meet "several parameters''.

"These tests were conducted by the Silk Board on the advice of the Union commerce ministry. Unfortunately, even before the Union government asked the board to test the product, the customs department had released the raw silk to some import licence-holders,'' board sources told Rediff On The NeT.

The results of the tests are bound to add grist to the campaign launched by former prime minister H D Deve Gowda against his bete noire and Union Commerce Minister Ramakrishna Hegde at a farmers' rally scheduled to be held in Bangalore on February 19.

Interestingly, Karnataka Chief Minister J H Patel has agreed to participate, at the behest of Deve Gowda, in the rally. This will be the first time that Patel will be attending a rally that is singularly called to expose what Deve Gowda calls the anti-farmer attitude of Hegde and policies of the BJP-led coalition.

"The test results have created a piquant situation. With the customs having released the imported raw silk yarn and the material not passing the tests, what can the government do? It can now neither send it back nor use it,'' say silk industry sources.

The implications of this are multiple. "The impact is going to be both in terms of economics as well as political. But, more importantly, the impact on the sericulture industry is going to be tremendous,'' said board sources.

The sericulture industry has a massive base of close to six million families dependent on the cultivation of mulberry with reelers and weavers (both in the handloom and powerloom sectors).

The industry is spread over 14 states in the country, but its impact is going to be felt primarily in Karnataka and Uttar Pradesh. Karnataka produces 65 per cent of the silk in the country and, therefore, a fertile ground for politics of silk.

Karnataka has been consistently campaigning against the smuggling of raw silk from China through the Bangladesh route. The sub-group on sericulture for the Ninth Plan had clearly stated that silk exports constituted only two per cent of the total textile exports of the country.

It had suggested maintenance of a "reasonable demand-supply gap in the conventional sense''.

But, the Union government decided in October 1998 to permit only government institutions like the Central Silk Board and the National Handloom Development Corporation to import raw silk that could be supplied to the big powerloom units. The notification neither fixed the price nor the quantity that is required to be imported.

Instead of correcting the situation caused by the notification, the Centre withdrew the permission to government institutions and issued special import licences. Again, it did not specify the quantity nor the price. Raw silk produced in the country costs Rs 1,300 per kg. ``Chinese silk costs $21 per kg and the traders make the profit at the cost of the Indian farmer and industry,'' say industry sources.

"As it is, under the duty exemption scheme earlier, the traders used to make a profit of Rs 500 to Rs 600 on a kg. This is apart from the fact that the exemption in duty was of the order of 40.4 per cent. And, if 500 kg was being imported, 400 kg used to be sold in the black market, debilitating the local farmers and reelers. Now, it is going to be worse,'' say industry sources.

All this meant that Chinese silk entered the Indian markets, causing "erratic price fluctuations, impeding production and thwarting efforts at quality development,'' the Silk Board, after a full-fledged meeting, wrote to the Union government.

Unlike the Karnataka government which wants a total ban on imports, the Silk Board is in favour of imports but with a cap to meet only the limited requirement of shortage of silk for powerloom warp. But, the government appears to be still dragging its feet.

"We have had two or three consultations in the last couple of months. We are, in fact, having another round of meetings in Bangalore in the next two days. The Union Commerce Secretary, P P Prabhu, is arriving in Bangalore on Tuesday for the meeting,'' said sources close to Hegde.

Hegde himself arrived in Bangalore late on Monday, but declined to comment. On the test reports of the Silk Board, these sources said, "The product will be tested at three other laboratories in Calcutta, Bombay and Madras. If the tests prove negative the entire shipment will be forfeited by the importers. There is no way sub-standard material will be allowed in the country.''

All this means that the Union commerce ministry will not be withdrawing the new raw silk import policy in a hurry. "It will not be withdrawn before the February 19 rally. That is for sure. The entire issue is being studied and it will take time,'' said sources. In short, the politics of silk will be the talk show while the farmers wait in anticipation.

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