Mills and doom

A section of the mill owners approached the BIFR as, then under the Sick Industries Companies Act (SICA), it was binding on the managements to refer the case to the BIFR if the unit had reported losses for three successive years.

Nine textile mills — Matulya, Kamla, Raghuwanshi, Modern, New Vinod, Shriram, Khatau, New Great and Khanna Rayon Mills — approached the BIFR with a revival plan. All these mills had proposed to dispose of their surplus land as provided under the amended Development Control (DC) rules.

Under the revised DC rules, the mills were to surrender one-third of the surplus land to Mumbai Municipal Corporation, one-third to Maharashtra Housing and Area Development Authority and the remaining area was available for development.

After consulting leading financial institutions, the State Government and the Rashtriya Mill Mazdoor Sangh (RMMS), the recognised union for the textile sector, the BIFR approved the revival package.

The emphasis of the revival package was on the utilisation of funds generated after disposal of surplus land as then the price of land in the heart of the city ranged from Rs 10,000 per sq mt to Rs 1 lakh per sq mt.

The entire price estimate for the surplus land was based on the prices prevailing in the metropolis between 1992 and 1994 during the Congress rule.

After the Sena-BJP Government came to power in March 1995, however, it was announced that under no circumstances it will permit disposal of surplus land. The alliance government also stayed disposal of surplus land.

The State Chief Secretary, Dinesh Afzalpurkar, admits that the revival of the sick and closed textile mills will be difficult in view of the unexpected fall in the prices of land. “The Government will have to apply its mind to this aspect as the situation then and now was completely different. When the revival packages were being worked out, the prices of land were much higher, but today, they have come down to a great extent,” he says.

The situation in the mills run by the National Textile Corporation will be the worst, as it had estimated to garner Rs 2,300 crore by disposing of 143 acres of surplus land in the metropolis. As per the existing prices, it will not get more than Rs 1,300 crore.

The Mill Owners Association (MOA) has, however, taken a completely different view of the prevailing situation vis-a-vis land prices. “No doubt that there is unexpected fall in the prices of land, but still there is a scope for revival of a section of the sick and closed mills,” MOA Secretary General V.Y. Tamhane says. “We may get less amount than expected. The difference could be organised with the help of the leading financial institutions. What is required now is that the alliance government should clear all the pending proposals,” he adds.

But the trade union leaders are not so optimistic. According to RMMS General Secretary Sachin Ahir, now there was no possibility of revival of sick and closed mills. “I am of the opinion that nobody else, but the alliance government, particularly Chief Minister Manohar Joshi should be blamed for the fiasco,” says Ahir. He says it is absolutely illegal to stay the disposal of surplus land as approved by the BIFR.

Band Girni Kamgar Sangharsha Samiti leader Datta Iswalkar, on the other hand, alleges that there has been a blatant violation of rules by the mill owners. “We found that they have consumed excess Floor Space Index (FSI) than permitted under the Development Control Rules,” Iswalkar says. The funds generated by disposing of the surplus land were not utilised for modernisation of the sick units, but were diverted for some other purposes, he adds. Chief Minister Manohar Joshi, however, refutes the allegations. He says if either the trade union leaders or the Mill Owners Association (MOA) was aggrieved by his Government’s decision to grant stay on disposal of surplus land, they should have immediately moved the BIFR against the Government.

“Since the alleged irregularities have been brought to my notice, I have asked Municipal Commissioner Girish Gokhale to look into the allegations and submit a report at the earliest,” says Joshi.

According to Tamhane, among the causes of the present crisis in the textile industry is the high cost of production of cloth. The cost of labour is higher, so is the cost of power as compared to Bhiwandi, the main powerloom centre. In Mumbai, power costs Rs 3 per unit, while in Bhiwandi, it is less than 50 paisa. In Mumbai, 1,000 litres of water costs Rs 33, while in Bhiwandi, it is less than Rs 6. The Mumbai Municipal Corporation is levying octroi at a rate of three per cent on cotton, while on polyester yarn, mainly used in Bhiwandi, the levy is less than 0.5 per cent.

“The Government should act immediately. Warning bells have started ringing. Now it is the question of the survival of the textile industry, which was once the backbone of city’s economic activity,” says Tamhane.