The spinning industry in Punjab, which employs close to 400,000 people and contributes 15.6 per cent of the total yarn production in India is suffering because of high power costs and taxes. Players say they have not carried out any major expansions in the spinning sector in the last few years.

In the last few years, textile majors of Punjab including Oswal Group, SEL Manufacturing, Abhishek Industries and Nahar Industrial Enterprise decided to set up their mills in Madhya Pradesh instead of Punjab since the state government there offered 5 per cent to 6 per cent interest subvention. The average per unit power tariff in Madhya Pradesh is close to Rs 5.50 per unit against Rs 8.25 in Punjab.

Punjab’s spinning industry has also been demanding rollback of 6.5 per cent VAT on cotton yarn. But the state government, instead of offering any relief to the already suffering industry, further increased the Infrastructure Development cess from 5 per cent to 13 percent from July 1, 2015. Given the situation in Punjab, many leading textile players chose to invest over Rs 10,000 crores in the other states.

While Vardhman Group invested about Rs 2,500 crores in Madhya Pradesh, Abhishek Industries built units worth Rs 3,000 crores and Nahar Industrial Enterprise and SEL Manufacturing, each invested Rs 2,000 crores in Madhya Pradesh. Out of 138 spinning mills in the state close to 80 are operational. Others are either sick, closed or under corporate debt restructuring. Decline in Chinese demand of cotton yarn has led to piling up of excess inventories.

Vardhmangroup.net