The programme will be implemented by 300 selected khadi institutions over a period of three years which has already started with release of first installment of Rs 96 crore to KVIC in March 2010. Under this programme, each reform implementing khadi institution (KI) will be provided assistance of around Rs 1.19 crore to implement the identified set of reform activities. Reforms are envisaged in raw material production leading to improved quality and reduced cost of khadi products, effective marketing with sophisticated professional support in the form of sales networking, better inventory management and design improvement. The unique brand image of khadi as an environment friendly heritage product would be harnessed through development of 'khadi mark'. Gandhian values will continue to be guiding principles in the entire reform process with focus on sustainability and growth. Around Rs 720 crore will be spent through KVIC on this programme between 2009-10 and 2011-12.
The budget allocation for khadi and village industries sector has been enhanced substantially from Rs 261 crore in RE 2009-10 to Rs 542 crore in 2010-11 which means an enhancement of around 107%.
MDA Scheme As An Improvement Over Rebate System
The Government had a system of providing 20% special rebate to customers for 108 days to coincide with Gandhi Jayanti/ local festivals to promote sale of khadi, a hand-woven fabric made from hand-spun yarn. Several Committees formed by the Government in the past had observed that a major part of the manpower and resources of KVIC remain engaged in administration of rebate, whereas main function of KVIC to develop the sector through appropriate schemes and other interventions required more emphasis. It was recommended that the system of rebate on the sale of khadi be substituted with suitable alternatives for Market Development latest by 31 March 2010.
Accordingly, after experimenting with several pilot trials and extensive consultations with stakeholders by KVIC, the Government introduced a more flexible scheme, namely, Market Development Assistance (MDA) Scheme on production of khadi in place of the earlier existing scheme of Rebate on sales with effect from 01.04.2010 for implementation by KVIC during 2010-11 and 2011-12. The scheme envisages financial assistance @ 20% of production value on khadi and polyvastra which will be shared among artisans (i.e., spinners and weavers), producing institutions and selling institutions in the ratio 25:30:45. Under the new system of MDA, sales are expected to be evenly spread throughout the year and the institutions will have the flexibility to use the assistance for increasing wages to spinners and weavers, on improving the outlets and quality of products besides giving incentive or discounts to customers.
Advantages of MDA vis-Ã -vis Rebate scheme
· MDA empowers spinners and weavers for which 25% of the total MDA obtained by the KI is earmarked for pending as cash incentive in addition to their normal wages, through their bank/post office accounts, for the first time.
· Under Rebate system, the outgo to the customer used to be reimbursed by KVIC in the following year, that too, after a considerable time lag. This resulted in depletion of working capital of the KI which adversely affected production and payment of wages to artisans. Under MDA scheme, the assistance is payable quarterly within the same financial year. Thus, MDA would improve the working capital position of KIs.
· The claim and settlement procedure under MDA Scheme is much simpler as compared to that under Rebate system.
· Under MDA, the institutions have the freedom to decide as to how they would like to utilize their share (75%) of MDA to improve functioning of their institutions in terms of production/ marketing, except the portion (25%) earmarked towards the financial incentive of spinners and weavers.
· MDA gives institutions more scope of improving quality of their production and also attracting high-end customers and selling khadi at deserving market prices, as the products are freed from the restriction of cost-chart regime.
· The State Governments are also free to declare any special rebate or incentive specific to the State, over and above the MDA.
Further, the long held notion that khadi can only be sold by allowing rebate to the customers is not supported by the fact that measures like providing better ambience of the sales outlets through renovations, improved designs, better implements and technology, trained and skilled salespersons play a significant role in boosting sales. A quick assessment made by KVIC in September 2010 indicated that KVI sector has recorded a significantly higher sales (Rs 150.55 crore) during April to August 2010 over the corresponding figure (Rs 141.32 crore) of 2009-10, and it is estimated to be 8% higher during 2010-11 than 2009-10 sales. Institution-wise also, the overall sales of khadi and polyvastra have gone up by around 26% over the corresponding figure of last year. Similarly, the sales are around 30% higher than the corresponding figure of the last year in respect of Khadi Gramodyog Bhawan of KVIC. Moreover, as stated above, new experiment in retailing (Chandigarh and Saharanpur) has shown a quantum jump in sales after the outlets were renovated and the system was revamped. The impact of innovative provisions of MDA taking care of the above aspects, are expected to be felt after one year as the KIs would, in the meantime, be strategically deploying funds under MDA, as per their need. The above facts indicate that introduction of MDA would further accelerate the sale of khadi and khadi products and that it is not just rebate but innovative promotional measures coupled with flexibility to the institution to deploy MDA funds, which would really help increase the sale of khadi.
The decision to implement MDA in place of existing rebate was taken by the Government with the approval of Cabinet Committee on Economic Affairs after elaborate consultations with stakeholders, and is a progressive step in the sector, giving enough flexibility to the institutions and making artisans effective partners in growth of the sector. As MDA is a new scheme, the Government and KVIC have taken several measures for effective dissemination of its features. KVIC has organized special meetings with various stakeholders, brought out advertisements, issued detailed circulars, to get all concerned acquainted with the Scheme. National Khadi Conventions, Lucknow in May 2008, Khadi Karigar Sammelans at Meerut, Hubli and Surendranagar, Gujarat between December 2009 and June 2010 as well as meetings with representatives Khadi Mission in August-September 2010 are some of the steps taken in which the benefits of the MDA scheme was explained to stakeholders.
A provision of Rs 260 crore has been kept in BE 2010-11 for payment of MDA on khadi and polyvastra produced during the current year and for rebate on khadi and polyvastra sold during 2009-10. An amount of Rs 39 crore has been released to KVIC as advance for disbursal of MDA to institutions and Rs 90.90 crore for settlement of rebate on sales made during 2009-10, which will ease the working capital position of the institutions.
Pending Rebate Claim And Special Rebate On Unsold Stock Of Khadi
The Ministry is also considering providing one time financial incentive on stock that has remained unsold as on 31.03.2010. Efforts are also underway to settle authenticated and verified pending rebate claims of khadi institutions as early as possible.
Stakeholder Consultation
Opinion of stakeholders has always been a guiding factor in the functioning of this Ministry. A number of fora are now available for consultation and voicing grievances including the National Khadi and Village Industries Board and the National Board for MSME. In addition, with the formation of two separate Core Groups for KVI sector, one headed by Minister (MSME) and the other headed by Secretary (MSME) these have been found to be highly effective means for the promotion and development of this crucial sector and participation of stakeholders in the framing of policies and monitoring/ reviewing the implementation of various schemes of Government in the sector.
Other Steps
The Ministry has been also implementing a number of other schemes for enhancing productivity and competitiveness of khadi industry and artisans, workshed scheme for khadi artisans, scheme for strengthening infrastructure of existing weak khadi institutions and assistance for marketing infrastructure and the cluster-based scheme for regeneration of traditional industry (SFURTI).
India
Reforms in Khadi Sector
Special Correspondent - 2010-10-07 13:18
To fully realize the significant growth potential of KVI sector, a comprehensive Khadi Reforms and Development Programme (KRDP) has been initiated by the Government with assistance to KVIC from Asian Development Bank. KRDP envisages re-vitalisation of KVI sector with enhanced sustainability of khadi, increased employment and income, increased artisans welfare through their capacity building, empowerment and enhanced earnings and also development of select traditional village industries.