CHAPTER— VI INDUSTRY IN JAMMU AND...

A CASE STUDY OF THE WOOL INDUSTRY IN JAMMU AND

KASHMIR

• • •

^ool is a commodity highly vulnerable to violent price fluctua

tions. The preceding chapters of this thesis have dealt with this

problem in details by making an indepth study of the price movements

of wools since World War I. Several 'highs' and 'lows' of wool

prices have been noticed. However, the more recent price escalation

of wool, which has been of great magnitude has created some severe

problems for the wool industry of India in general and of Jammu and

Kashmir in particular. 'With this in view, an indepth study of the

wool industry of Jammu and Kashmir has been made. The repercussions

of unfavourable price movements have been investigated and possible

solutions thereof have been suggested.

However, before scrutinizing the above problem, it would be

worthwhile to firstly discuss the general industrial scenario of

Jammu and Kashmir State and then focus attention on the wool industry

of the state. This is important because the wool industry too has

to operate in this very industrial environment of the state.

CHAPTER— VI

6.1 : Industrial Scenario in Jammu and Kashmir

Jammu and Kashmir State is endowed with rich natural and human

resources, which if exploited for commercial purposes, could change

242

the whole industrial scene of the state. The rich deposits of

mineral resources like Gypsum with deposits of 65 .721 million tonnes

and 92.96 per cent purity in Baramulla district, Limestone (principal

raw material for cement) with deposits of 90 million tonnes, Coal

with deposits of 100 million tonnes in Kalakote, Lignite with 5

million tonnes deposits at Nichihama, Borax and Sapphire in Ladakh

area and Sapphire deposits of Padder at Doda district in large quan

tities have found a pathetically low commercial exploitation even

after 40 years of independence. The :.pAme mover of the industry,

2power, with a potential of over 10,000 megawatts in the state is

generated only to the tune of 200 megawatts in the state.

In 1975, however, late Sheikh Mohd Abdullah, the then Chief

Minister of Jammu and Kashmir State, started a vigorous campaign

for industrialis^ion of the state. This is not to say, however,

that there was no industrial development prior to 1975. Infact some

significant strides in industrialisation of the state were success

fully achieved in the period before 1975 as well.

*Aany industrial ventures in the medium and large sectors have

come up successfully in the recent years. The State Government, has

invited entrepreneurs from other states for establishment of medium

3and large scale units with an estimated investment of Rs.450 crores.

Nevertheless, only few of them have set up their units so far. Among

the big industrial houses who have set up their industrial units are

Hindustan Lever Ltd., Union Carbide, Bhilwara Textiles, Singer Sewing,

243

Goenkas, JK Organisation, RSi Switchgear, Kholapur Sugar Mills and

Continental Devices etc. etc.

In response to the interest shown by these houses and also by

many other entrepreneurs, the State Government has come out with an

4attractive package of incentives. Among these incentives are deve-

5 6loped land on 90 years lease at nominal premium of Rs.24,000/- per

7acre, 90 per cent transport subsidy, cheap power and 100 per cent

interest free sales tax loan repayable after a moratorium of 7 years.

Besides there are many other incentives as well. The state government

has also developed industrial estates throughout the state. The

biggest of these industrial estates is the one at Bari Brahmana in

9Jammu Province which has an area of 7600 acres and is fast develo

ping into an industrial focal point. Already 4 5 ^ medium/large-

scale industrial units with an investment of about Rs.80 crores"^ and

12an annual turnover of Rs.200 crores, have come up at Bari Brahamana.

The Valley of Kashmir provides the temperate climate and dust

free atmosphere which are most suited for the development of electr

onic and hi-tech industries. Consequently the government has develo

ped an industrial estate at Rangreth near Srinagar which covers 165

13acres of land and has 65 built-up sheds. The Department of Elect

ronics, Government of India has set-up a centre for design and tech

nology in the complex so as to provide R&D support to the electronic

14industry. So far 20 units have already been set up in this estate

244

for the manufacture of wide ranging items in electronics like

jewels for watches, colour TV sets, light emitting diodes, two-

in-on es, electric blankets and laminated boards. ffl/S Goenkas

have set up two units for the manufacture of electronic lamina-

15tions with an investment of Us. 16.00 crores.

Likewise, there is another developed industrial Estate of

Khonmoh in Kashmir Valley where some big industrial units like

Union Carbide Ltd., Essem Coated etc. are located. Besides JK1 /I

Cements have their 600 TPD Cement plant at Khrew. Other indus

trial areas for medium and small-scale industries are also being

developed in the state.

However, small scale industries seem to be more suitable

for the conditions in Kashmir than the medium and large scale

industries. The number of S. S. I. units registered formally with

the Directorate of Industries in 1973-74 in the whole state of

17Jammu and Kashmir was a mere 2203 units and in 1977-78, it rose

18to 3498 units employing 17,252 people. There was then an apor-

eciable increase in the number of small scale units in the state.

/\s per the latest available data, the number of 3. S. I. units in

19Janmu and Kashmir in 1986-37 was 21,323 employing over 94,000

people. This implies that the number of 3 .S .I. units in Jammu

and Kashmir has increased by almost 10-fold in a span of just 13

years as is evident from Annexure: 6 .1 .

Apart from the incentives mentioned above, certain other

important fiscal incentives are also available to the entreprene

urs in Jammu and Kashmir. The whole state of Jammu and Kashmir

245

including Srinagar and Jgmmu cities comes under 'No-Industry

District, Category-A* and hence 25 per cent Central Investment

20subsidy subject to a maximum of Rs.25.0 lakhs is available on

capital investment everywhere. The Government of India offers

2175 per cent transport subsidy on cost of transport from Rail

head to factory and vice versa for raw material and finished

products. The State Government offers for electronics industry

2250 per cent subsidy on raw materials and finished products from

23Srinagar to Delhi and Delhi to Srinagar; 50 per cent subsidy is

available towards the cost of preparation of project reports;

24power is available at subsidised rates of 20 paisa per unit which

25is the lowest in the country and a subsidy of 20 per cent in

addition to the 25 per cent central subsidy for the cost of Dies-

26el Generating sets. A price preference of 12 per cent for medi

um and large units is also available in the state.

The researcher analysed the benefits of these incentives

coupled with the relatively free availability of term loans from

various agencies like Jammu and Kashmir State Industrial Developme

nt Corporation (SICDQ), Small Industries Development Corporation

(SICDPJ, State Financial Corporation(SFC), Industrial Development

Bank of India(IDBI) etc. etc. besides the commercial banks. It is

interesting to note that on a project costing Rs.1.00 crores in

fixed assets, the promoter would have to invest a mere fe.10 lakhs

246

as his equity. This is so. because with the prevalent debt-equity

ratio of 2 :1 , the loan component would be Rs.67 lakhs. The total

equity would be Rs. 33 lakhs, out of which Rs. 23 lakhs would be cen

tral subsidy available to him.

The state Government also provides industrial sheds to the

entrepreneurs. The annual production from such units which was of

27the order of Rs.85.86 lakhs in 1969-70 with the daily employment

OOof 2513 people rose to Rs.2,692.21 lakhs in 1985-36 with the daily

employment of 6736 people, as is revealed in Annexure: 6 .2 .

It is astonishing to note that inspite of these package of

incentives, the pace of industrial development in the state of Jam

mu and Kashmir has been pathetically low as compared to other states

of the country.

For the industrial backwardness of the state, it is not only

the state government that should be blamed but the central governme

nt too is equally responsible for keeping the state away from the

industrial advancement. This is clearly demonstrated from the fact

29that out of a total investment of over Rs.40,000 crores in the pub

lic sector, the states’ share is mere Rs.10 crores. This accounts

for a mere 0.025 per cent of the total investment in public sector

in the country.

The surveys conducted by the researcher at some important ind

ustrial estates in and around Srinagar, Khonmoh, Rangret, Gangyal

and Bari Brahamana and personal discussions with the officials of

247

SIDOO, SICDP, 3FC and some commercial banks revealed the following

facts

1) the number of large and medium scale industrial units

actually established in the state can be counted on

finger tips. Amongst these? units too, some have already

pulled down their shutters,

2) a majority of industrial units in all the three sectors

are lying sick for the past several years,

3) some seemingly prestigeous projects like Cadbury Fry

at Sopore and Swiss Jewels at Rangret never went into

commercial production even though the government was very

enthusiastic about their establishment in the state,

4) even those who are supposed to be the successful ventures

in the state, are disgusted with the working environment

of the state,

5) with the exception of Bari Brahamana,Jammu which is indeed

developing into industrial focal point of the state, the

industrial activity in all other estates is at the lowest

possible ebb, and,

6) a large number of unscrupulous pseQdo-industrialists who

have somehow or the other managed to get their ’units'

registered with the Directorate of Industries have usurped

248

the Central Investment subsidy and have never produced

anything worth the name.

This is indeed a sad state of affairs particularly in an era

of large scale industrialisation and the development of high-tech

industries. Besides,it is shameful to notice that in India, which

incidentally is considered to be the 10th industrial nation of

the world, the state of Jammu and Kashmir figures only scantily on

its industrial map.

This sorry state of affairs is not the resultant factor of the

governments' apathy alone. Indeed there are innumerable factors to

which the State of Jammu and Kashmir is confronted with. Some of

these factors, as observed by the researcher, are as follows

1) Lack of Infrastructual Facilities:

The infrastructure in our state lacks all the important compon

ents like adequate and uninterupted power supply, proper development

of industrial areas, roads, communication within the state and with

rest of the country.

Anongst these problems, the following could be highlighted :-

i) Acuta .Slig .rt

The power available in the state, despite its supposedly vast

potential, is not only acutely short but also of a very infer

ior quality for the purpose of industrial consumption.

249

The researcher found to his astonishment that industrial

units could hardly run for 8 hours in a day and that too during

the working season of summer months. The voltage supplied was very

bad. It was as low as 300 volts against 440 volts. Obviously

when an industrial unit is supplied with such low voltage of

power, and that too is available for short durations of the day,

the level of production would definitely be incredibly low.

This would result in uneconomical operations.

Many industrial units have,however, had no alternative but to

instal their own Diesel Generating sets (D.G. sets). These

captive D.G. sets, however, involve a high capital expenditure.

The researcher found that a small powerloom factory owner had

to invest Rs.50,000 for acquiring a 10 KVA D.G.set. Similarly

higher capacity D.G. sets cost lakhs of rupees. Besides, the

researcher found that the power generated from the D.G. sets

costs from Rs.l<25 per unit for smaller capacity sets to Rs.2.0

per unit for larger capacity sets. This is 6-10 times more

expensive than the power supplied by the Electric Department.

Moreover, the maintenance costs of D.G. sets are very high.

1 1 ) Tca n sP -g rfca tio rc . .to M je m a ;

30The railwayline extends to hardly 3 per cent of the total

road mileage of the state and for the rest, the industrialists

have to depend on road transport.

250

As 35 per cent of the total area of the state is mountain-

eous and h illy , the roads either are not dependable or are not

fully developed. Moreover heavy snowfall during winters blocks

the national highway between Jammu and Srinagar. It also

blocks other roads in Kashmir and Ladakh regions for days at

a stretch.

As if it was not enough, the time and expenses involved for

road transportation of incoming and outgoing goods are very

heavy indeed. A typical survey to this effect revealed that

while it cost 50 paisa per kgl for a woollen mill dn 1 the priv

ate sector to get its raw materials in goods train from 3orobay

to Jammu railway head, it cost them 75 paisa per kg from Jammu

to Srinagar through road transport. Obviously, this factor too

adversely affects the cost of production.

The transport subsidy is at present permissible from Rail

head at Jammu. Units located in the far-flung areas of the

state and using local raw materials v iz , timber, oil seeds,

stovies etc are not eligible for such subsidy. Hence the units

in the hunterland of the state are deprived of this incentive

too.

i i i ) Communication Problems.:

The problems of communication both within and outside the

state are also grave. The researcher observed these problems

31

251

both in postal communication as also in telecommunications.

The telephone system in the state is in such a bad state that

most of the telephones all over the state at any particular po

int of time are found either dead or held-up with other lines.

It becomes extremely d ifficu lt , if not impossible to make an

important and urgent business call-J. The telex lines are often

out of order. The modem FAX telecommunication system which is

getting increasingly popular in our country also does not work

in this state. The researcher was surprised to find that the

telecommunication lines in the state are not suitable for the

operation of FAX.

The postal communication in the state is also bad. A letter

posted in Srinagar for instance invariably takes 5-6 days to

reach Ludhiana- an industrial city in the neighbouring Punjab.

The conduct of business under such circumstances is obviously

d ifficu lt .

iv) Problems of Roads and Water:

Although the state government boasts about the development

of wide net work of roads throughout the state, yet many areas

particularly the far-flung areas of the state are connected

with rough and highly undeveloped roads. Even some of the

industrial areas of the state do not have developed road net

work. Nevertheless, it is gratifying to note that road netwo

rks in the state are being developed on a priority basis and

252

there has been a good progress in this respect in the recent years.

The problem of water supply to the industrial units is also qu

ite serious. The state government seems to ignore the importance

of provision of water for industrial consumption. Nevertheless,

overhead water tanks have been provided in all the industrial areas.

However, the water supplied from these tanks is inadequate.

2) forking Capital Problems:

The climate and terrain of the state necessitates for the small

scale sector to have their raw materials and other inputs for a lon

ger period, which involves greater and frequent flow of credit from

the banks. Whereas, term loan assistance to the units is required

once, the working capital requirements of the small industrialists

are recurring and do not appear to have been nursed adequately.

During the course of this work, a very interesting feature per

taining to the working capital requirements of woollen worsted units

and silk reeling units was observed. The woollen worsted units of

the state have to import their raw material almost entirely from

Australia ana a period of upto 6 months is required for the procur

ement and receipt of these goods. This means hugs inventories of

raw materials have to be carried so as to take care of this lonq yet

unavoidable lead time. Similarly in the case of silk reeling units,

the procurement of cocoons is done only once in a year thereby

253

necessitating much larger working capital requirements.

The study also revealed that the spares, tools and equipment

consumable stoyes, fu el, components and other items of stores have

to be stocked in larger quantities for a considerable period of time

thereby necessitating a much larger outlay for working capital.

As discussed above and supported by the research findings, there

are certain factors which necessitate financial provision for higher

stock inventory of raw materials and inputs. It requires larger

finances, other than the normal estimates of working capital by the

banks as at present. The commercial banks have to go a few steps

further than their present norms for determination and fixing of

working capital limits.

Unless this is considered as an essential requirement by the

financial institutions, the problem that retards the industrial

development of the state cannot be solved fully .

3) Lack of Work Culture:

The work culture in the state is absolutely lacking. The res

earcher found several evidences to this effect during the survey of

various industrial units in the state. The workers, the staff and

even the men in the management do not work with zeal and enthusiasm.

They are more bothered about their own interests rather than the

over all goals of the organization. The researcher found to his

254

astonishment that whilst in one unit the workers did not want to

work for the night shift because they feared that this may dry up

their blood, in other unit, the workers would look more towards the

clock than towards their work. In public sector units, the workers

were more interested in politics rather than work.

4) Labour-Manaaement Relations Problem*

The 1 abour-management relations in the state are not always

very cordial. However, this problem prevails throughout the country.

The researcher, nevertheless noticed that political exploitation was

the root cause of the uneasy relationship between the labour and the

management.

5) Dearth of Professional Managers:

The industrial units in the state by and large are managed by

non-professionals who have no knowledge or experience in management.

The researcher was surprised to find that many public sector

industrial undertakings in the state have a bureaucrat at the helm

of their affairs. Since such officers do not possess the necessary

acumen to manage the affairs of an industrial undertaking on commer

cial lines , such undertakings invariably are mismanaged. This is

clearly reflected in the balance sheets of these undertakings. /toart

from other troubles, lack of professionalism in management has also

contributed towards the sickness of the undertaking.

It is surprising to note that even the present Chief Minister

255

of the state was quoted as having said recently that the public

sector industrial undertakings of the state are being managed by the

inefficient bureaucrats and that is why he does not expect them to

make any profits. There is , therefore, dearth of professional mana

gers in the state. An urgent attention needs to be drawn to this

aspect if the industrial undertakings are to be managed well.

In a Seminar organised by the Kashmir Chamber of Commerce and

Industry in September,1988, where this researcher was an active

participant, the following group of industries were identified as

30suitable for development:

a) V»ood-based Industry/Sparts Good Industry.

b) Mineral based industry.

c) woollen Textile Industry.

d) Silk Textile Industry.

e) Electronic and High-Tech Industry.

f) Leather and Fur Industry.

g) Industry based on Aromatic Plants and Herbs.

h) Horticulture based industry.

For the development of the above group of industries, the

following recommendations have been made :-

i) Formulation of Industrial Policy for the state based on the

present position of the industry fixing priorities and action

programme for the next 20-25 years,

256

2) ban the export of wool in raw form,

3) increase the mining lease from 15 to 30 years,

4) vocationalization of education so that skilled workmen

are made available to the industries,

5) promotion of a separate industrial area for processing

leather,

6) development of fruit processing industries in the state,

7) total purchase of products manufactured by SSI units by

SICDP and marketing thereof,

8 ) infra-structure in various industrial estates should be

provided as per the requirement,

9 ) detailed mineral investigation and survey of reputed

consultants to promote mineral-based industries,

10) recommendations of the Task Force on the woollen Textile

Industry should be implemented,

11) export of raw sheep skins should be banned,

12) cultivation of Aromatic plants and herbs should be promoted,

13) diversification in raw materials procurement by 3I00P,

14) adequate funds for transport subsidy be provided,

15) conversion of present exhibition complex into a permanent

industrial complex,

16) formulation of Committee to survey defunct and non-existent

units , and,

17) interests of the small scale industtial units should not be

encroached upon by the public sector units.

257

These recommendations, i f implemented in letter and spirit

could change the entire industrial scenario of the state.

It is pertinent to note that in the state public sector, the

Jammu and Kashmir Industries Ltd. is a premier and frontline

industrial corporation of the state. This corporation was establish-

31ed in 1963 and has as many as 21 units under its management. These

units manufacture a variety of items ranging from woollen items to

silks, rosin and turpentine, pharamaceuticals, leather goods, jfcinery

etc. A consolidated statement of production, sales and profitability

of the company as a whole is given in Annexure: 6 .3 . The data

given therein portrays a significant growth of this organisation

over the last 11 years. The company also showed some handsome profit

for a period of 6 years between 1979-80 to 1984-35. However, from

1985-86, the company has been incurring heavy losses which has ser

iously eroded its net worth.

A thorough investigation has revealed that the losses suffered

by the company are due to the following reasons

i ) Obsolescence of plant and machinery,

i i ) inferior quality of local cocoons,

i i i ) lack of raw materials for the resin unit,

iv) exhorbitant increase of timber prices in the recent years,

v) overstaffing of the various units of the company^and,

vi) lack of financial support from the state government.

However, it is gratifying to note that in order to overcome the

d ifficu lties encountered by the company, a perspective corporate

plan for the period 1989-1995, has been prepared by the company.

After studying the industrial scenario of the state, the next

step would be to make an indepth study of wool industry of the state.

The following analysis, therefore, firstly considers the raw wool

production and then makes a case study of woollen industrial units /

organisations of the state.

6 .2 The Wool Industry of Jammu andKashmir State- an outlook of Raw Wool Production

In the recent years, the Jammu and Kashmir state has made some

good progress in the production of wool. The production of wool from

18 .6 lakh population of she6p is now estimated at 18 lakh kgs. per

annum.

The production of wool from the government live stock has also

increased significantly. There are 16 Sheep Breeding Farms, 13

intensive Sheep Development Projects and 18 Sheep Development Orqani-

33sations in the various districts of the state. vThile the production

of wool from all these institutions was estimated at 130.89 quintals

in 1971-72, it increased to 389.89 quintals in 1935-36, which repre-

34sented a 3-fold increase in a span of 15 years, as is revealed xn

Annexure: 6 .4 .

However, inspite of these impressive gains in the wool production

of the state, it is ironic that the few industrial units which exist

259

in the state, procure their requirements of wool almost entirely

from other sources.

Whilst making a survey of the various woollen units of the state

it was pointed out to the scholar that bulk of the wool produced in

the state, is not suitable for their purposes. The staple length

of this wool is below 40 mm. This is too short for application in

the wool industry of the state.

The wool growers of the state who are by and large the migrat

ory flocks of 'Bakerwals', 'Gaddies' and 'Gujjars ' and who keep on

migrating alongwith their flocks of sheep from high-altitude mount

a in 's in summer to plains in winter, resort to wool shearing three

times in a year. This practice destroys the wool as the staple

length of the wool fibres sheared in this manner is extremely short

and unsuitable for further application. As compared to this practice

the wool ‘Clip is sheared only once in a year in Australia. It is

because of this reason that the Australian wools are longer and are

most suited to the entire wool industry of the world.

It is d ifficult to understand why these sheep breeders of the

state do three shearings in a year. 3ut the scholar, after some

deliberations with a cross-section of bakerwals of Kangan block and

some areas of District Anantnag, has come to the conclusion that they

want to make a quick buck no matter the sheared wool may fetch only

a paltry sum to them. Also because of the compulsions of their

260

migratory customs and practices, these Bakerwals are not inclined

to resort to the scientific practice of one shearing per year. The

wool produced from the sheep reared by other farmers is very coarse,

kempy and discoloured and hence not suitable for conversion into

fine woollen products.

6 .3 Case Studies of Wool Industry of Jammu & Kashmir:

The woollen textile industry of the Jammu and Kashmir State,

despite its vast potential for development, is not very big. The

number of units in the mill sector- both in the public and private

sector - is just six units altogether. The number of powerlooms

owned by the powerloom owners and weavers cannot however, be authe

ntically stated because no such data is available in the state. It

is strange though the woollen powerloom sector, despite its import

ance for the shawl industry of the state, has never been looked into

by any of the government agencies. The conservative eestimates,

however, put the number of woollen powerlooms in working condition

at 200 although the number of powerlooms installed for the purpose

may be more than 1000.

The reasons for the extremely slow growth of the wool industry

in the state and indeed for the industrial sector as a whole have

been discussed in the first part of this chapter. However, there are

some more reasons responsible for the slow growth of the wool indus

try in this state. They are as follows

261

1) Shortage of fine quality raw wool,

2) cut throat competition from the mills located in Punjab,

3) shortage of labour,

4) d ifficulties in transporting loose bulking wool,

5) distance from wool trading markets, and,

6) total absence of spare parts and ancillary units.

However, since the aim of this work is to study the wool indus

try in some details, it would be worthwhile to investigate the

problems being encountered by these units. More importantly,'! >

however, the repercussions of the recent wool price fluctuations on

the state of health of these units would be examined. For a clear

understanding of the whole issue, however, it would be useful to

examine in brief the profile of each of these units.

Before taking up each of the units/organisations individually,

it would be worthwhile to analyse the structure of the wool industry

of Jammu and Kashmir. The structure of the wool industry as

understood by the researcher,is depicted hereunder

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263

The following organisations connected with the wool industry

of the state were studied in depth and some useful conclusions emer

ged thereof. The units studied are :-

1) Jammu and Kashmir State Sheep and Sheep Products

Development Board, Baghi-Ali Mardan Khan, Srinagar

(also known as Wool Board).

2) Himalayan Wool Combers L td .,

Bari Brahamana, Jammu.

3) Jammu and Kashmir Industries L td .,

Srin agar.

Woollen Textile Units:

i) Government Spinning M ills , Nowshehra,Srinagar,

ii ) Bemina Woollen M ills , Bemina, Srinaqar,

i i i ) Government Woollen M ills , Shirin Bagh,Srinagar,

Mattoo Worsted Spinning and Weaving Mills

(P) L td ., Nowshehra,Srinagar

- a private sector spinning unit,

5) ' Powerloom Sector for Woollen Cloth:

- 40 looms sample-owned by 10 small firms of

weavers.

I) Jammu and Kashmir Sheep and Sheep Products Development Board (Wool Board), Srinagar.

Introduction:

The Wool Board is an autonomous organisation of the Jammu and

264

Kashmir Government. It has an authorised capital of Rs.200 .00 lakhs

which is fully subscribed by the Government. The subscribed capital

is Rs. 180 .00 lakhs. The Board commenced its commercial operations in

January 11931.

The Board procures wool from the sheep breeders of the state.

It also imports wool from Australia and New Zealand. The Board then

processes the wool and sells the processed wool to the wool manufa

cturers of the state.

vVoxkino of the Board

The working of the Wool Board can be divided into three aspects

v iz , procurement of wool, processing of wool and sales and marketing

of processed wool. The data pertaining to the procurement of wool

is depicted in Table 6 .1 , processing of woollen in Table 6 .2 and

sales and profitability in Table 6 .3 .

265

Table .6*1

Procurement

( in lakh kgs. )

S.No. Year Quantity

1. 1981-82 2 .1 4

2. 1982-83 2.48

3. 1983-84 2 .85

4. 1984-85 3 .20

5. 1985-86 3 .55

6. 1986-87 4 .06

Total 18 .29 lakh kgs.

Source: Vyool Board, Srinagar^sg

266

T akl3 £ m.Z

Processing of Wool

(processed in other units on commission processing basis)

mm I**

( in lakh k g s .)

S.No. Year Description of ProcessingGrading Combing Spinning Weaving Felting

1. 1981-82 1.62 0 .5 1 0 .3 8 - - -

2. 1982-83 2 .2 1 0 .9 4 0 .4 7 - - 0 .0 10

3. 1983-84 2 .8 1 1.10 0 .5 0 0 .1 0 0 .0 1 0 .0 1

4. 1984-85 2 .3 5 1.56 0 .4 7 0 .3 3 0 .0 01 0 .0 3

D. 1985-86 3 .70 1.90 1 .12 0 .3 9 0 .0 02 -

S . 1986-87 3 .01 2 .45 1 .21 0 .5 6 0 .0 02 -

Source: Wool 3oard, Srinagar5>*82.

267

Sales Turnover and Profitability

mm # tm

( Rs. in lakhs)

•o•CO Year Sales Turnover Profitability

1. 1980-81-82 32 .92 - 0 .4

2. 1982-83 72 .72 + 0 .1 4

3. 1983-84 9 0 .0 0 + 1.69

4. 1984-85 153.00 + 4 .0 4

5. 1985-86 185.43 + 6 .73

6. 1986-87 202 .00 + 4 .3 2

Source: Wool Board, Srinagar^?*#

268

Conclusion :

From the above data, it is evident that it is a success story

for the Wool Board all the way. The following conclusions can be

derived from the study of this organisation

1) The procurement of wool by the Board almost doubled from

1981-82 to 1986-87, in five years, from 2 .1 4 lakh kgs. in

1981-82 to 4 .0 6 lakh kgs. in 1986-87.

2) Ihe processing of wool which was started on a modest scale

in 1981-82 were extended to spinning and weaving processes

f rom 1983-84.

3) There was a considerable increase in sales conducted by the

Board over the years. Starting from a modest sales turnover

of Rs.32.92 lakhs in 1981-82, the sales made in 1986-87 were

to the tune of Rs.202 .00 lakhs.

4) Baring the year 1981-82, when the Board incurred a loss of

Rs.4 9 ,0 0 0 /—; there were profits all the way thereafter. The

profits grew substantially from 1984-85 onwards. The highest

net profit of Rs.6.73 lakhs was recorded in 1985-86.

5) One of the main reasons for increase in profitability of the

Board from 1984-85 is due to the sale of wooltops which were

processed from Australian merino wool imported by the Board.

The Boart got attractive prices for these wooltops.

269

Implications of Price Fluctuations of Wool on the Profitability of the Board

The recent increases of the wool prices has had no adverse

effect on the profitability of the Board. On the contrary, by

importing more lots of greasy wool from Australia since 1984-85, the

Board earned more profits as they sold the wooltops processed otds of

these wools to the local manufacturers at attractive prices.

The mechanism of the trading of wooltops by the Board works on

these lines — the Board imports consignments of greasy wool in the

ranges of 22-27 microns from Ajstralia and/or New Zealand. It gets

them processed into wooltops at combers in Bombay or Jammu. It then

computes all the expenses incurred by them from Haw wool stage to

the wooltop stage. It then adds 5 per cent service charges and

disposes off the wooltops at a price which includes actual expenses

plus 5 per cent service charges.

The Board acquired bulk of its consignments of greasy wool from

Australia and New Zealand when the prices of these wool prices were

in the region 500 Australian cents per kg for 22 micron wool to

35375 Australian cents per kg for 27 micron wool during 1984- to 1936.

Thereafter,there was anunprecedented escalation of wool prices in

1987 and 1988. The Board then processed them into wooltops, added

their service charges etc, the prices still worked out cheaper for

the actual users because by then the prices of raw wool had gone up

considerably. This indeed is the main reason for their better profi

tability in the recent years.

270

Notwithstanding all this, the recent upward swings in raw wool

prices is bound to affect the profitability of the Board as soon as

they procure these expensive wools.

The Wool Board is being criticised by the local wool merchants,

traders and manufacturers for being responsible for the recent price

escalation of wool produced in Jammu and Kashmir. In this connection

the scholar went round the Srinagar Valley and interviewed a cross-

section of these traders. The conclusions emerging out of the survey

are that the wool Board is indeed responsible for recent price

increases of local wools. According to them the wool which used to

be priced at Bs.30/- per kg for long cross-bred, Rs.20/- per kq for

medium and Rs.15/- per kg for short coarse qualities upto 1980 is

now priced at Rs. 40/- to Rs.45/- per kg for long cross-bred, Rs.30/-

per kg for medium, Rs.20/- to 25/- for short cross q u a l i t y and "s. 45/-

to 50/- per kg for Kashmir merino wool. This represents a substan

tial increase of over 33 per cent. This, in the opinion of the

researcher has hit the wool industry badly. However, the Wool 3oard

too has its own reasons for increasing the procurement rates as they

want to protect the interests of the primary wool growers by provid

ing remunerative price for their produce.

It is suggested that in order to combat the adverse effects of

wool price escalation, the Board should adopt the following strateg-

271

i) It must procure coarser varieties of wool in place

of more expensive finer varieties,

i i ) the Board should resort to Forward Buying of wool.

Forward Buying, as discussed earlier, is an effective

way to minimise the adverse effects of wool price

fluctuations.

I I . Himalayan Wool CombersLtd. , Bari Brahamana, Jammu

^ntMdu.c.tiqa-

A wool combing unit promoted originally by the Jammu and Kashmir

Industries Ltd. at an estimated capital outlay of Rs. 194.07 in 1972

was finally completed in A p ril ,1979 with an actual capital expenditure

of Rs.301.43 lakhs as is depicted in Annexture:6.5. The escalation

in the project cost was attributed to the all-round escalation in

prices of plant, machinery, buildings and pre-operative expenses*

The plant was later on transferred to an autonomous public sector

undertaking, namely M/S Himalayan Wool Combers L t d ., Jammu, which

was floated for the purpose.

37The licenced carded capacity of the plant is 9 .7 5 lakh kos

per year, out of which 5 .0 lakh kgs comb-worthy fine greasy wool was

planned to be procured locally from the states* wool production and

the balance quantity would come on commission combing from actual

users in the state, who were entitled to import wool. The local wool

272

was to be procured and supplied by agencies set up for this purpose.

However, during years 1979-80, 1980-81, and 1981-82, the local wool

processed by the plant for combing never exceeded one lakh kgs in

any of these years. Hence the assumption of availability of wool

from local sources proved wrong.

The wool unit of SIOOP was transferred to Himalayan Wool Combers

38Ltd on 25th May,1984. This wool unit is looking after the procure

ment of greasy wool and sale thereof after comtjing, and is named as

Raw Material Bank - a wing of Himalayan Wool combers Ltd. Inf set,

it has been feeding the raw material (wooltop) reouirements of the

local industry- both in public and private sectors, to a large extent

since 1984.

Working of the Company:.

The Company had set production targets of at least 50 ,000 kgs

per month or 6 .0 lakh k g s ^ per year at normal levels of efficiency.

It had also hoped that since it is the first and the only unit of its

kind in the state, it will be able to show a good performance.

However, the working of the company since its inception depicted

in Table Nos. 6 .4 and 6 .5 amd ia F&g* paint a different

picture altogether.

273

Table

Production achieved and losses suffered by the company

S.No. Year Production achieved (kg. in lakhs)

Lossessuffered(Rs. in lakhs)

Accumul ated Losses(Rs. in lakhs)

1. 1979-80 0 .9 6 35 .48 35 .48

2. 1980-81 4 .4 9 30 .97 66 .45

3. 1981-82 5 .2 5 30 .70 97 .15

4. 1982-83 4 .19 31 .01 128.16

5. 1983-84 4 .0 1 36 .90 165.06

6 . 1984-85 4 .2 4 22 .86 187.92

7 . 1985-86 5 .0 3 24 .71 212 .63

8 ; 1986-87 3 .15 37.56 250.19

9 . 1987-^8 4 .3 1 37 .90 288.09

Source: M/S Himalayan Wool Combers Ltd ., Jjmmu,lJ8?

274

TflbJLs i i>5

Cash Losses suffered by the Comp any

• • •

( Rs. in lakhs)

S.No, Year Cash Loss Accumulated Loss

1. 1979-80 8 .8 4 8 .8 4

2. 1980-81 11 .32 20 .16

3. 1981-82 12.59 32 .75

4. 1982-83 14.56 4 7 .31

5. 1983-84 13.57 60 .38

6. 1984-85 16 .24 77 .12

7 . 1985-86 10.68 87 .80

a. 1986-87 0 .9 1 8 8 .71

9. 1987-88 8 .6 3 . 9 7 .3 4

By courtesy of Himalayan Wool Comber* L t d ., Jammu,)9lS

275

Conclusions:

From a study of the above data, the following main conclusions

can be drawn :-

1) It w ill be perused that the company never attained even its

minimum production target of 6 .0 0 lakh kgs. per annum let alone

its licenced capacity of 7 .5 lakh kgs per year.

2) The company suffered heavy losses year after year. Its accum

ulated losses were Rs.288.09 lakhs upto 1987-88. This means

that out of a total capital outlay of Rs.301.48 lakhst Rs.233.09

have been eaten upr.in losses t ill 1987-88.

An investigation of the problem of the poor performance of the

company revealed that the following factors are responsible for the

same : —

i) the wool which the company normally gets for processing from

the Wool Board has a maximum length of 40 mm, whereas the

system demands sn average length of not less than 60 mm for

better processing results. The production efficiency of the

plant, therefore, drops down to 50-60 per cent.,

i i ) there are frequent breakdowns of machines and as the machinery

is imported and original spare parts are not available in In d ia ;

indigeneous spares of inferior qualities are used,

i i i ) the sequence of machinery is not suitable for processing more

than 4 per cent vegetable matter and hence the raw material

quality should be better* and,

27G

iv) there is a lack of work culture amongst the workmen.

The scholar was, however, perplexed that if a comber having the

same kind of plant elsewhere in the country like for example, Wellm

an (Hindustan), Bombay, Wool Combers of India (Calcutta), Oswal Wool

Combers Ludhiana etc. and even the recently established combing

units in Punjab, can make handsome profits in the combing business,

what is the reason then for the bad performance of Himalayan Wool

Combers Ltd. A th®rough investigation revealed the following facts

besides the reasons mentioned above :-

1) the unit has acquired a very bad reputation in the market.

Almost all the spinners contacted by this scholar complained

that the wools combed at this unit are generally very bad in

quality. They went to the extent of saying that the wools

which are &fen-fcr: to them for combing are simply spoiled.

The scholar, who has the technical know-how, personally

checked the quality of wooltops produced by this company in

the Textile Testing Laboratories at several occasions anc

found that-( a) the wooltops are very irregular with weights

varying between 2 .0 to 3 .0 grammes per metre, (b) the

wooltops are very burry as the unit is not able to extract all

the burrs from the wool, (c) they do not use anti-static

agents in processing, and, (d) due to defective trapping,

the blending is not done properly.

2) the management of the company lacks both the will and exper

tise to manage this unit, and,

277

3) labour unrests, politics and apathy towards the work has

ruined this company.

Implications of Wool Price...i&caLatlon

The recent price escalation of wool has adversely affected

the performance of this company. The company imports the /Australian

merino wools directly through its Haw Material Bank Wing. It also

combs wools of other actual users of the state on commission basis.

.As far as the commission combing is concerned, the fluctuating wool

price will not affect this company because in that case, the comoany

combs wools which belong to other manufacturers. However the bulk

of wool is also directly imported by this company. Hence the esca

lation in its prices is bound to deterioriate its profitability .

This is evident in the company's enormous loss of Rs.37.90 lakhs in

1987-38, which was the year when the prices of wool increased cons

iderably.

There are, however, several other reasons for the enormous

losses suffered by this company. It i s , however, beyond the scope

of this work to investigate all such causes. Notwithstanding that,

as the Managing Director personally told this researcher, the recent

price escalation has badly hit this company.

As this company is confronted with a host of problems, it will

be d ifficult job to find easy solutions to its problems. Neverthel

ess, as far as the adverse affects of wool price escalation are

concerned, the researcher suggests the following strategies to combat

278

the same

i ) the company should resort to the strategy of input

diversification as discussed earlier in this thesis

For this purpose, Cashmillon could be a better repl

acement for wool,

i i ) the company should procure coarser micron wools and

process the same into suitable wooltops. Coarser

micron wools, as discussed earlier , are considerably

cheaper than finer micron wools.

The researcher opines that these are the only two strategies

which this company would be able to adopt. Other strategies, dis

cussed earlier in this thesis, will not work because the company is

financially sick.

I l l , Jammu and Kashmir Industries Limited(Woollen Textile Units)

Jammu and Kashmir Industries Ltd, the premier public sector

undertaking of the state manages three woollen units , namely, Govt.

Spinning M ills , Nowshehra, Srinagar, Bernina Woollen M ills , Bernina,

Srinagar and Govt. Woollen M ills , Shirin Bagh, Srinagar. An indepth

study of all these units was made by the scholar and findings of the

research are given hereunder :-

I) Govt. Spinning M ills . Nowshehra.Srinaaar

Introduction:

The following data gives information about the installed capac

ity , the production capacity and investments made thereof from the

279

inception of the unit t i l l its final expansion in 1984-85.

T.flhltJL.6

Year Installed Capacity Investment

Number of Spindles

Production capacity in kgs.(on 2-shift basis for 280 days per year. For 42 tnm count)

(Rs. in lakhs)

1960-61 1200 54 ,600 15.47

1968-69 1200 65 ,400 35.56

1973-74 1200 54 ,600 7 .35

1984-85 2460 1 ,3 0 ,9 20 72 .62

Total 6060 3 ,0 5 ,5 2 0 146.47

By courtesy of- Govt. Spinning M ills , Nowshehra,Srinagar,;984

280

This unit which was the first of its kind in Jammu and Kashmir

State was established in 1959-60. In itially it was promoted by the

Jammu and Kashmir Government. Later on, it was transferred to the

Jammu and Kashmir Industries Ltd, - an autonomous public sector

undertaking in 1963. As is evident from the above data, the unit

was started with 1200 spindles with an investment of Rs. 15 .47 lakhs

in it ia lly . It was subsequently expanded in three phases and now

has 6060 spindles in all with a production capacity of over 3 .0

lakh kgs per annum. The total investment made till its final exp

ansion in 1984-85, has been of the order of Rs. 146.47 lakhs. The

unit employs 254 persons out of which workers are 155 in number and

staff TJttmber 99.

The unit produces mainly woollen worsted yam s suitable for

the manufacture of shawl cloth locally known as Raffal cloth. It

is , however, also capable of producing knitting wools and fine wors

ted carpet y am s .

'forking of the Unit:

An indepth study of the working of the unit was conducted by

the researcher. Consequently,the following data was collected

and/or formulated :-

Table 6 .7 gives the production of the yarns (in k g s ), the sales

made thereof (in kgs) and profit/loss incurred by the unit for the

period 1982-83 £o 1987-88.

281

Talai & Jul

Production, Sales and Profit/Loss of the Unit

S.No. Year Produ ction ( in kgs)

Sales (in kgs)

Profit/Loss (in lakhs of Rs.)

1. 1982-83 7 3 ,4 1 0 .8 2 3 5 4 ,0 0 0 .0 0 - 13 .22

1983-84 5 7 ,14 7 .1 4 4 66 ,33 7 .00 - 2 0 .1 3

3. 1984-85 61 ,2 3 0 .3 8 2 69 ,5 9 4 .0 0 - 8 .2 4

4. 1985-86 7 3 ,5 4 7 .5 8 4 7 7 ,7 6 6 .0 0 - 25 .08

5. 1986-87 9 1 ,7 4 5 .5 8 4 9 8 ,3 3 0 .0 0 - 34 .45

6. 1987-88 9 5 ,7 5 1 .5 4 4 9 4 ,03 9 .0 0 - 25 .66

Source: Government Spinning M ills , Nowshehra,Srinagar,>9lt.

282

In table 6 .8 , data pertaining to the sale of y a m s , manufact

uring expenses, profit/losses and cash profits/losses incurred by

the unit from 1977-78 to 1987-88 is given.

The data collected from the un^t also pertains to the raw-

material consumed by the unit, total wages (including Adm. Staff

w ages /salaries),the total cost incurred and the percentages of raw

material to total cost and total wages to total cost. This is

shown in table 6 ,3 .

283

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285

Conclusion*!

The following conclusions are drawn from the abov« data

1) This unit which was reported to be a profitable venture in the

irftial stages of its working has been incurring heavy losses

in the recent years. A survey of its profitability for the

past ten years reveals that barring the years 1977-78, 78-79

and 1981-82 when the unit did make small profits, it has been

in the red all the time. The losses have become particularly

heavy since 1985-86.

2) The sales turnover and the manufacturing expenses have cone up

considerably due to the higher value of wool, successive expa

nsion of the plant and higher incidence of wages and other

inputs in the recent years.

3) Despite the fact that the installed capacity of the unit is

over 6000 spindles and its production capacity on two-shift

basis is over 3 .0 lakh kgs per year, the production of the

unit has never reached even 1 .0 lakh kgs mark. The maximum

production of the unit so far has been 95 ,751 kgs in 1977-78.

This leaves a shortfall of over 2 .0 lakh kgs in a year. Hence

the unit is grossly under-utilised.

4) With the increase in the capacity of the unit, the raw material

consumption has also increased. But if the full capacity of the

plant would have been utilised , the consumption rate of raw

material would have been much higher.

286

5) The total costs of the unit have been going up successively

over the years. The sudden increase in total costs in 1987-88,

when in one single y am the costs went up by over 30 per cent,

has only augmented the problems of the unit.

6) The wages and salaries to the workers and administrative staff

have registered a steep increase from 8 .87 lakhs in 1979-80

to Rs.37 .58 lakhs in 1987-88.

The increase in total wages from 1979-80 to 1984-85 can

be explained to be the consequence of expansion programmes of

the unit besides the usual increase in various allowances. The

wages have been going up by over 8 lakhs per year without any

increase in the production of the unit.

7) The contribution of Raw Material cost to the total cost lies

between 67 per cent to 76 per cent with an average of around

70 per cent. The contribution of total wages to the total cost

lay between 11-22 per cent. The wage content in the total cost

was particularly high in 1986-87 and 1987-88. Other inputs and

expenses account for the balance.

Implications of Price Fluctuations:

The influence of price escalation of wool in the recent years

on the performance of the unit has been of great consequence.

First of all it is important to note that the contribution of

the raw material cost ie . the cost of raw wool to the total cost of

287

finished product i * . th* yearw l ie * between 67-76 per cent with

an average of around 70 per cent. Hence the escalation in the

raw material price is bound to increase the total cost of prod

uction. Consequently the profitability of the unit will also

suffer unless suitable measures are taken to combat the price

escalation of raw wool.

It will also be noticed from the analysis of wool prices

that although the prices of 22 micron wool, which is mainly used

by this unit, went up considerably in the recent past- about 70

per cent in 1987 and another 35 per cent in 1988, the prices of

2 /4 8 s y a m increased by only a mere 18 per cent and 17 per cent

respectively. This represented an extremely disproportionate

increase in the price of y a m vis-e-viz the wool prices. It foll

ows, therefore, that the unit has not been able to abD**>t the esc

alation in its raw-material prices. The unit found it extremely

d ifficu lt and indeed impossible to pass on the burden of price

escalation to its customers. This was so because it was subser

vient to the market and could not dictate its own price.

In this connection, the researcher extracted some very useful

data from the unit which pertained ±o j the price of wool at Raw

stage, wooltop stage, y a m stage and also at the subsequent stage

of weaving when the shawl cloth is woven from the same y a m .

Table 6.10 gives this data. The unit actually purchased the wool

288

of 22 micron quality at the price shown in the table, computed the

landed cost of wooltops processed out of this wool and compared it

with the average y am price and price of shawl cloth in the market

for the years 1985-88.

289

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It will be observed from the data given in Table 6 .1 0 that

the unit purchased 22 micron wool consignments during 1984-85 3

530-570 i^stralian cents per kg, its landed cost of wooltops per

kg was fe.92.93, the average price of the yam in the market was

eRs.130/- per kg, of a plain shawl of 350 grams wight was Rs.48.50.

The price of the y am went down to Rs.108/- per kg in the market

in 1986-97 and that of the shawl to Rs.42-45/-. In 1988, the pr

ices of 22 micron wools had gone up and the unit purchased the

consignments ■S 870-900 AC per kg over the year, the landed cost

of wooltops was Rs.152/- per kg.

It is evident from the above analysis that while the prices

of 22 micron wool increased over 64 per cent in 1988 as compared

to the prices of 1984-85, the prices of y a m spun from the same

wool increased by only 42 per cent. This proves that the rising

trend of y a m prices is not commensurate with the corresponding

rising trend of the raw wool.

Hence, it is conclusively proved that this unit , has not been

able to absorb the full burden of price escalation of raw wool.

towardsConseauently this aspect too has contributed^the mounting losses

of the unit.

Considering the fact that raw material constitutes the sin

gle most important factor in the total cost of the product and

the wage factor is of a secondary importance only, there is li

ttle this unit can do to avoid the adverse effects of raw wool

price increases on the profitability of this concern; unless

291

offcourse, It is able to increase the prices of its products (yam s)

proportionately. This i s , however, a d ifficu lt proposition because

the market is the governing factor for the prices of y am that

rule from time to time. It will be seen from the analysis of y a m

prices prevailing in the Indian markets that the prices of yam s

never hiked in the same proportion as the wool prices. Consequently,

this unit too had to bow to the dictates of the market regardless

of the costs incurred by it in producing the y a m s .

The increase in the percentage content of wages in the total

cost of the product from 15 to over 22 per cent in the recent years

has also contributed towards the excessive losses of the unit in the

repent years. The unit had no option but to increase the wages of

its workers considerably in the recent years as otherwise there

would hat?e been industrial unrest. However, the wages paid to an

average worker by this unit and indeed by the other units of the

Jammu and Kashmir Industries L td ., as w ell, are much higher than

their counterparts in the private sector. There is , therefore,

scope for rationalisation of wage structure of the unit which could

lead to the reduction in wage content in the total cost of the

product. Her>ce the cost of production could be lowered accordingly

thereby improving the overall performance of the unit.

Another factor that needs urgent attention and most serious

consideration is that if the unit has to survive, it must increase

its production. Its maximum production has been pathetically low

292

at less than 1 .0 lakh kgs in a year against the capacity of over

3 .0 lakh Kgtr per year. The more it produces* the lower will be

the incidence of wages and other overheads per unit of the product.

This can considerably improve the overall performance of the unit.

In conclusion, it is suggested that this unit too should adopt

the following strategies to combat the adverse effects of recent wool

price escalation —

i ) It should resort to iipput diversification . It could

spin CashmiJ.lton yam s or any other suitable man-made

fibre yam s instead of woollen y am s .

i i ) In case it decides to carry on with the wool, the

unit could then use coarser wools and produce suitable

yam s therefrom. Since this unit feeds the shawl

industry of the state, it could spin coarser count of

yam s from coarser wools- 42 count or 38 count yam s

instead of 48s count y a m s . These yam s too could be

used for the manufacture of shawl cloth.

Other strategies detailed in this thesis will not work. This

is so because those strategies involve financial implications and

this unit is financially sick.

2) Government Bernina Woollen M ills,Bernina, Srinagar.

intaQductlga*

A composite woollen and worsted textile mill was started by

293

the Jammu and Kashmir Industries Ltd. in 1967 and it was named

Government Bernina Woollen M ills , Bernina, Srinagar. In the first

phase, 488 woollen spindles with two preparatory carding machines

at an investment of Rs.44.19 lakhs and the production capacity of

1 .20 lakh kgs per annum were commissioned in 1967. Thereafter,

the unit was expanded in three phases adding to it the worsted

spinning department, weaving department and finishing and dyeing

department. Hence it assumed a composite mill character and the

total investment thereof mounted to Rs.655.53 lakhs after the com

pletion of all the phases. A detailed data of the total investment

in plant and machinery, u t ilit ie s , building and the production cap

acities of the departments is given table 6 .1 1 .

^the total number of persons employed in the unit as at prese

nt is 311 comprising 89 staff and 222 workers.

294

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296

Wo iking of the Unit

A comprehensive study of the unit was carried out and the

necessary data both from the primary and the secondary sources at

the mills as well as at the Board O ffice of Jammu and Kashmir Indu

stries Ltd, was collected.

The data in Table 6 ,1 2 provides the real picture of the unit

depicting therein the profitability of the unit from 1977-78 to

1987-88. The data in Table 6 .1 3 provides the information about the

production, sales and losses incurred by the unit from 1983-84 to

1987-88.

Profitability of Government Bemina Woollen M ills ,Sgr.

S.No. Year Profit (+)(Rs. in lakhs)

Loss {-)(Rs. in lakhs)

1. 1977-78 — 11.96

2. 1978-79 — 7 .66

3. 1979-80 1407

4 . 1980-81 - 4.29

5. 1981-82 - 7 .6 0

6. 1982-83 - 7.28

7 . 1983-84 - 15.37

8. 1984-85 - 28.67

9 . 1985-86 ----- 33.89

10. 1986-87 mmmm 29.48

11. 1987-88 — 43.99

Source: J& I , Board O ffic e ,S r in a g a r^ .

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From the above data, following majtfr conclusions can be

drawn

1) The performance of this unit is very depressing. This unit

has never come out of red nor is it likely to, unless some

drastic measures are taken to save it from imminent collapse.

Although the unit has been incurring losses ever since its

inception but the same have been really incredible from

1984-85 onwards.

2) The production of the unit has never crossed the limit of

1 .0 lakh metres of cloth when the capacity at the finishing

stage is 7 .5 0 lakh metres.

ALthough the weaving capacity of the unit has been increased

by 3 .0 0 lakh metres making a total capacity of 4 .0 0 lakh metres

in ,1988, by installing 8 super-speed projectile Sulzer looms,

yet the total production of the unit in 1988 has been just

1 .00 lakh metres. These looms were imported from Switzerland

at an enormous cost of Rs.185 lakhs.

The scholar wondered why this unit with such a sophisticated

high production machinery is in such a bad shape. Several other

similar units in the country are doing much better than this unit.

Whilst making a comparison of this unit with M/S Raymond Woollen

Mills ( of JK group), Bombay,which also produces the same type of

299

finished products, it w ill be observed that Raymond Woollen Mills

is the success sto<4y all the way. This concern was established in

1925 and the production graph of this mill has always looked up

and as in 1986, the mill produced 74 .46 lakh metres of cloth besides

other items like hosiery, blankets etc. Its reserve surplus, which

is a good indicator of its profitability was of the order of Rs.40.91

crores two years back.

The scholar does appreciate that it is d ifficult to make

comparison with a well reputed firm like Raymonds. However, one

must ponder if others are so well o ff , why can't Bernina Woollen

Mills at least comei out of its present ailing situation.

It may be worthwhile to mention here that the same company-

M/S Raymond Woollen M ills , wanted to take over Bernina Woollen Mills

in 1930-81 and they had almost finalised the deal. However, as per

the o ffic ials of this unit, the deal could not materialise because

of political pressures. Keeping in view the extra ordinary perfor

mance of M/S Raymonds in the past 20 years, as also its wide net

work of over 1000 selling points all over the country and its exp

erts to over 20 countries of the world, there is no doubt that the

Bernina Woollen Mills today would have been presenting a different

picture altogether had it been merged with M/S Raymonds.

On further investigation of the unit, the scholar was informed

by the concerned o ffic ials in the JKI Ltd. office that the main

problem of Bemina Woollen Mills is the imbalance of its production

300

department. There is an element of truth in it as is evident from

Table 6 .1 1 . It will be seen that while the Finishing and Dyeing

department has a capacity of processing 7 .5 0 lakh metres of cloth,

the total capacity of the Weaving department was only 1 .0 0 lakh

metres t il l 1982, which was later on fcreased by 3 .0 0 lakh metres

in 1988. Similarly spinning capacity is also low, hardly sufficient

to feed the Weaving department. So unless the production capacities

of Spinning and Weaving departments are augmented further, the

bottlleneck will remain. It i s , however, beyond one's comprehension

that how could the planners of this unit instal such a huge capacity

(7 .5 0 lakh metres) Finishing and Dyeing section at a enormous inves

tment of Rs.55 .02 lakhs when they could hardly feed it with the cloth• /

from the Weaving department.

Even after the installation of Sulzer looms which has augmen

ted the weaving capacity to 4 .0 lakh metres per year, the Finishing

and Dyeing department w ill still remain idle for over 5-£ months in

a year.

M other problem which was observed during the course of the

study of this unit is that workers of the unit are not able to run

the sophisticated Sulzer Weaving machines arid whenever any breakdown

occurs, it becomes d ifficu lt to repair the machine.

Implications of Wool Price-Increases

The wool prices which suddenly increased by over 160 per cent

301

for the finest wools to about 50 per cent for the coarser wools in

1987-88 from their 1996 levels, has had their influence on the

profitability of this unit. This is also evident from the steep

rise in losses from Rs.29 .48 lakh in 1986-87 to Rs.43.99 lakhs in

1987-88, the year when the prices reached the all time high level.

The prices of the fabrics produced by this unit which should

have been increased because of the escalation of wool prices could

not be increased. Hence the adverse effects of wool price escalat

ion on the profitability of the unit could not be avoided. Infact

it added fuel to the f ire as far as this unit is concerned.

To lighten its burden of heavy losses due to wool price

escalation, the researcher suggests that this unit could adopt any

of the following strategies :-

i) Input Diversification:

Since this is a composite unit,ushould produce

fabrics of man-made fibres like Polyester,Acrylic

fibre fabrics etc. in place of wool provided the

prices of these man-made fibres is lesser than wool.

Blends of wool with cheaper man-made fibres like

Viscose, as discussed earlier, could also be tried,

i i ) Use of Coarser Micron Wools:

Provided that the quality of the fabrics is maintained

within the acceptable lim its, cheaper and coraser

302

micron wool could be employed in place of more expensive

fine wools.

3) Government Woollen M ills ,Shirin Bagh, Srinagar

In 1934, a private company, namely Karan Singh Woollen Mills

was established, which was later on transferred to the government

in 1950 and was named Govt. Woollen M ills , Shirin Bagh, Srinagar.

The unit was subsequently transferred to the Jammu and Kashmir

Industries L t d ., in 1963.

Ihe written down value of plant and machinery as on 31 .3 .1 988

was Rs.8.13 lakhs and the total capacity of the plant is 50 ,000 metres

of woollen cloth per annum. The unit employs 248 people comprising

of 63 persons in staff and 185 as labourers. At present the unit

has a surfkus of 30 staff members and 35 workers making a total of

65 persons in surplus.

Working of the Unit:

After studying the unit and making thorough investigations

thereof, the data of profitability of the unit from 1977-78 to

1987-88 was collected and is compiled in table 6 .1 4 .

The data of yearly production, sales and the losses incurred

by the unit from 1983-84 to 1987-38 is given in table 6 .1 5 .

3 0 3

Tabl.ft..6«.14

Profitability Data of Govt. Woollen M ills ,Shirin Bagh,

Srinagar.

S. No. Year Profit (+) (Rs. lakhs)

Loss (-) (Rs. lakhs)

1. 1977-78 mmmm 5 .9 2

2. 1978-79 — 2 .9 1

3. 1979-80 , 10 .35

4 . 1980-81 - 4.56

5. 1981-82 4 .5 2

6 . 1982-83 — 9 .5 0

7 . 1983-84 — 17.02

8 . 1984-85 — 37.32

9 . 1985-86 — 33.76

10. 1986-87 — 19.83

11. 1987-88 22 .44

Source: J .K .I . L td ., Board Office, Srinagar,1988.

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Conclusions:

From the above data* following main conclusions are drawn

1) The Unit is the oldest woollen mill in Jammu and Kashmir

having a capacity of 50 ,000 metres of woollen cloth per

annum. However, it has never been able to u tilise its

full capacity and the maximum production which it has been

able to tum out so far was 44 ,500 metres in 1987-88 having

a value of Rs.65.76 lakhs. Under-utilisation of its capacity*

has, therefore, been its one of the main reasons for poor

performance.

2) The Unit has been Incurring heavy losses year after year and

the same have been more acute in 1984-85 at Rs.37.32 lakhs, in

1985-86 at Rs. 33 .76 lakhs and in 1987-88 at Rs.22.44 lakhs./

The reasons for its depressing performance are almost the same

as Bemina Woollen M ills . However* one more important reasons attri

buted to its depressing performance is its obsolete conventional

plant and machinery which is incapable of running at higher levels

of efficiency. Besides, as the machinery is old, there are frequent

breakdowns in it . This lowers the plant efficiency considerably.

Consequently,it would not only result in lower production but also

in higher wastages thereby increasing the cost of production

considerably.

306

Impact of Wool P r lc . Fluctuation!!

Since this unit uses mainly Indian and local wools where the

prices have remained more or less stable t il l as late as 1987, the

impact of raw wool prices has been negligible.

However* since the prices of Indian and Kashmir wools too

increased by almost 20 per cent in 1987, it has had its influence

on the profitability of the unit because the unit has only margina

lly increased its price of woollen cloth during this period.

It i s , nevertheless, gratifying to note that the Jammu and

Kashmir Industries L t d ., has drawn up a perspective corporate plan

for wool group of factories for the period 1989-90 to 1994-95 and

the same is given in Annexure: 6 .6 . It is hoped that by implemen

ting this perspective plan , the wool group of factories will be

able to earn profits, u t ilise their production capacities to the

optimum limits and increase their sales turnover progressively.

The Managing Director of the Organisation also wants the

Government to sign a memorandum of understanding (MOU) with them.

This w ill give them a free hand in managing their units and abstain

the government from interfering into their affairs. He also hopes

to inculcate the much needed work culture in his organisation.

Notwithstanding th is , if the past experiences are any guide

then it appears that the management of the Jammu and Kashmir Indus

tries will have to work very hard indeed to achieve the objectives

307

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310

set forth by them in their Corporate Plan. &at then a beginning

has to be made to take these units out of this vicious circle and

make them at least economically viable.

IV. Mattoo Worsted Spinning and Weaving M ills , Pvt. L t d .*Naalabal,Nowshehra,Srinagar

Introductiont

Mattoo worsted spinning and weaving mills pvt. L t d ., was the

f irst and t il l recently the only unit of its kind in the private

sector which was established in 1965. It has a total number of

2000 spindles Installed in the plant. The total investment is

Rs. 19 .15 lakhs which includes Land and Building worth Rs.3 .1 5 lakhs

and plant, machinery and equipment worth fc.16 .00 lakhs. The total

production capacity is 6 0 ,000 kgs of ^ a m per year, on two-shift

working basis.

The mill primarily produces fine worsted yam s of various counts

suitable for the manufacture of shawl cloth. The total employment

of this unit including staff is 90 , Out of which 80 per cent of

the workers are immigrant workers who hail from Nepal, Bihar,Punjab

and Himachal Pradesh.

The unit is reputed for its quality yam s and has also had the

distinction in the state in producing the fine Cashmere *Pashmina*

y a m s for the first time on its machines. The famous 'Pashmina'

311

shawls were woven from these y am s .

w<? rklna At..

An indepth study of the unit was made and the data collected

is compiled and depicted in the following tables:-

In table 6 .1 9 , data pertaining to the production, sales andIn

profitability of the mill from 1973-74 to 1987-88 is given, table

6 . 2 0 , data pertaining to production, wages, cost, percentage contri

bution of wages and percentage contribution of raw material in the

total cost is given. In table 6 . 2 1 , a comparison of raw wool,

wooltop and yam prices is given.

Tabltt 6 ,19

Production,Sales and Profitability

S.No, Year

Production (lakh kgs)

___Quantity(lakhkgs)

Value (Rs. in lakhs)

P r o f it (+ ) / Loss (-)(Rs. in lakhs)

1 . 1973-74 0 . 2 2 0 .2 6 19 .52 1 .7 32 . 1974-75 0 .3 4 0 .3 4 36 .04 + 1 .1 43. 1975-76 0 .5 3 0 .5 2 51 .92 + 0 .4 44 . 1976-77 0 .4 9 0 .4 6 48 .45 + 0 .5 75 . 1977-78 0 .4 6 0 .4 7 54 .89 + 0 .3 76 . 1978-79 0 .4 3 0 .4 5 49 .26 - 1 .167 . 1979-80 0 .4 6 0 .3 9 4 2 .94 + 0 .0 38 . 1980-81 0 .5 5 0 .5 9 6 9 .40 + 2 .5 3

9 . 1981-82 0 .4 2 0 .4 1 52 .16 0 .5 51 0 . 1982-83 0 .4 2 0 .4 4 60 .25 - 0 .2 7

1 1 . 1983-84 0 .2 9 0 .3 0 39 .68 - 2 .6 11 2 . 1984-85 0 .3 4 0 .3 3 45 .90 — 1 .3213. 1985-86 0 .2 8 0 .2 8 4 0 .70 - 2 .3 1

14. 1986-87 0 .3 0 0 .3 3 39 .00 - 5 .5 815. 1987-88 0 .3 6 0 .3 3 4 6 .0 1 — 2 .1 5

Source! Mattoo Worsted Spinning and Weaving M ills , Nowshehra, Srin ag a r,1988.

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On the basis of the above data,the following conclusions are

dravwi

1) The unit has not been able to u t ilise its full capacity.

Nevertheless it has made profits in the years 1974-75 to

1977-78 and 1979-80 to 1981-82. In other years, it has been

incurring losses and the loss has been particularly high in

1986-87. The under-utilisation of capacity seems to be the

main cause of these losses.

2) The production of the unit which had been as high as 55 ,000

kgs in 1980-81, has been declining in the recent years. It is

interesting to note that when the production was 55 ,000 kgs

in 1980-81, its net profit at Rs.2.53 lakhs was also the high

est. As the production declined, the mill went into the red.

I t , therefore, implies that the production and the profitability

of the concern are directly related to each other.

3) The percentage contribution of raw material cost to total

cost is between 62 - 6 9 .5 per cent, as is evident from the

data pertaining to the years 1982-83 to 1987-88. The percen

tage contribution of wages to total cost is between 6 .9 -

10 .8 per cent. The wages actually account for Rs.9.65 to

Rs. 1 5 .90 per kg and the average as at present is around Rs.15/-

per kg. Hence while the raw material accounts for around 65

per cent in total cost, wages account for around 10 per cent

315

and the balance 25 per cent is on account of interest on

working capital loaps and other overheads. Thus it is predo

minantly the raw wool price which should, under normal circu

mstances, govern the y am price as well. The contribution of

wages to the total cost structure is not of any great conseq

uence.

in ip U £ C la r is . . , a f . - J a a l p. , E§ cal attfln

It w ill be observed that this unit purchased raw wool at

480 Australian cents per kg in 1984-85, at 526 Aistralian cents per

kg in 1986-87 and at 765 Australian cents per kg in 1987-88. The

influence of exchange rate of Australian dollar, and the customs

duty on wool, varying as they are from time to time, was also sign

ificant. This is evident from the fact that despite the wool price

goingup from 480 Australian cents per kg in 1984-85 to 526 Austral

ian centrs per kg in 1986-87 i . e . , an increase of 9 .5 per cent, the

price of raw wool in Rupee terms decreased from Rs.50.39 per kg in

1984-85 to Rs.41 .95 per kg in 1986-87 ie . a decrease of 16 .7 per cent.

This happened because the exchange rate of -Australian dollar in

1986-37 was just Rs.7.98 per A $ compared to Rs.10.50 per A $ in

1984-85.

Again as the price of raw wool increased from 526 A $ per

kg in 1986-87 to 765 A $ per kg in 1987-88 ie . by 4 5 .5 per cent,

the actual increase in terms of Indian Rupees was from Rs.41 .95 per

kg to Rs.67.98 per kg ie . by 62 per cent because the exchange rate

of Australian $ in 1987-88 was higher than 1986-87.

316

Similarly, as the customs duty on imported raw wool was

decreased from 40 per cent in 1984-85 to 20+5 per cent in 1986-87

and 1987-88, the incidence of customs duty in the total landed cost

of raw wool also decreased. Hence,there was almost 13 per cent red

uction in the customs duty which also influenced the total landed

cost of raw wool. Hence, the total landed cost of raw wool which

was Rs.72.55t. per kg in 1984-85 declined to Rs.52.76 per kq in 1986-87

but later on increased to Rs.84.96 per kg in 1987—88 . Similar was

the case of wooltops as well.

The average ruling price of 2 /4 2 s y a m was Rs.l30/- per kg in

1984-85, declining to Rs.120/- per kg in 1986-87 but again rising to

Rs.ISo/- per kg in 1987-88.

It will also be observed that while the wool prices increased

by 4 5 .4 per cent in /^istralia currency in 1987-88, the same increased

by 62 per cent in equivalent Indian currency. The corresponding

increase in y a m price was only 25 per cent.

Hence, it follows that with the tremendous increase in prices

of raw wool in 1987-88, the prices of y a m spun from the same wool

increased by only about half of that of raw wool. Obviously, the

repercussions of price escalation were severely felt by this concern.

This is evident by its defining profitability in the recent years.

It i s , therefore, suggested that this company should adopt

any of the following strategies to combat the adverse effects of

3 1 7

wool price escalation

i ) Input Diversification:>- •

The company could switch over to Cashmillon. This way,

it can avoid the recurring wool price escalation.

i i ) Use of Coarser Wools:

Since this company also produces yam s for shawl cloth,

it could u tilise cheaper coarser wools and spin 4 2 s or

38s worsted y a m which would also be suitable for weaving

the shawl cloth.

H i ) Fqrwflri,

In case the company can arrange sufficient finances,

it must resort to Forward Buying. This would enable the

company to beat the future price increases. ^

Comparison of public sector JKI Wool group of units with private sector Matto Worsted Spinning and Weaving M ills .

The following parallels can be drawn

1) The profitability data of JKI wool group of units v iz ,

Govt. Spinning M ills , Nowshehra, Govt. Bernina Woollen M ills ,

and Govt. Woollen Mills in comparison to private sector comp

any v iz , Matto Worsted Spinning and Weaving Mills Pvt. Ltd.

is depicted in table 6 .2 1 and in the graph ( f i g .6 .2 ) .

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It is evident that Govt. Spinning Mills of JKI Group, which

has shown some profit in the years 1977-78, 78 ,79 ,81x82 ,82- 83

compares well with Matto Mills who have also shown some profits

in 1977-78, 79-80, 80-81 and 81-82. However, for rest of the

years, both these mills as also other units of JKI Group have

incurred losses.

There is , however, a difference- the amount of losses incu

rred by Matto Worsted Sprinning 8. Weaving Mills in these years

is considerably lower than its competitors in JKI Group.

2) The percentage contribution of Raw Material cost to total cost

in case of Govt. Spinning Mills lay between 65 .26 - 7 6 .0 per

cent whereas in case of Matto Worsted Spinning M ills , it lays

between 62 .5 - 6 9 .5 per cent. There is thus only a marginal

difference of this aspect between the two concerns,

3) There is a considerable difference between Matto Worsted and

Govt. Spinning M ills in respect of percentage contribution of

wages and salaries in total cost. In the formers case, it

lies between 6 .9 - 10 .4 per cent whileas in latters* case, it

lies between 12 .85 - 2 2 .3 per cent.

Hence, the percentage contribution of total wages to total cost

of the product in the case of Govt. Spinning Mills is more, than doub

le than that of Matto Worsted Spinning and Weaving M ills . This is

indeed the paradox of the public sector undertakings in Jammu and

323

Kashmir. These workers have to be paid at a much higher rate than

their counterparts in private sector companies. Indeed it has been

observed by this scholar on the shopfloor of each of these m ills, the

workers of Government Spinning Mills tend to be more lethargic than

their counterparts in Matto Spinning M ills . They seem to take their

work casually because they think that whether one works harder or not,

it does not make any difference. They will eam their wages all the

same. The presence of vigorous trade unionism and political exploi

tation has unfortunately resulted in more inefficiency of these wor

kers. The work culture is simply missing. On the other hand, the

workers in the private mill work much harder as they know the more

they prtiuce, the more incentives in wages they would get. Infact,

when Raymond’ s were negotiating the take over deal of Bernina Woollen

Mills with the JKI in 1980-81, they had laid a pre-condition that

the workers of the concern would have to follow the Raymond*s code

of ethics and rules. This condition was totally unacceptable to the

trade unions of JKI because they wanted to work in the same fashion

under their management also.

This is probably the greatest disadvantage for the industrial

concerns in the public sector. Whilst they are constrained to enga

ge labour at a much higher rate, the private sector concern can

easily engage a much cheaper labour which eventually helps them to

be more profitable. However, there is little the Govt. Spinning

Mills can do to reverse this trend as otherwise they would have to

324

confront the hostile labourforce resulting in the industrial dispute.

In the light of the above circumstances, the researcher, after

thorough investigations, makes the following suggestions to improve

the lot of the wool group of industries of Jammu and Kashmir

Industries

%

i) The wool group of industries of company should be made

more autonomous and given a free hand in the management

of their affairs ,

i i ) They should be run purely on commercial lines ,

i i i ) The surplus labour and staff which are an unnecessary

burden of these units, should be done away with. They

could be adjusted elsewhere in the government or other

organisations,

iv) There should be no political interference or exploitation

whatsoever in these units,

v) The management of these units should be encouraged to

inculcate the work culture amongst the workers,

vi) These units should be managed by professional managers

and technocrats,

v ii) Adequate arrangements should be made for the training of

workers and supervisory staff.

3 2 5

V) The Woollen Powerloom Sector

I.nt.iQ4y.£ii2n:

The woollen powerloom sector in Jammu and Kashmir is run by

small firms of weavers. In the absence of any authenticated data,

it is d ifficu lt to say how many powerlooms are installed in the

state. Nevertheless, whatever their number, the total number of

powerloom*which are actively engaged in the wool cloth manufacture

does not exceed 200. Hence this is a tiny sector of the wool ind

u s t r y of the state. This sector is engaged in the manufacture of

the ’ H a ffa l ’ cloth used for world-famous Kashmiri shawls.

The ‘Raffal* cloth needed for the shawls was originally manu

factured on the handlooms which were then supplemented by the power

looms in early 6 0 *s. Now the bulk of the *Raffalf shawl cloth is

woven on the powerlooms in Jammu and Kashmir as well as in Punjab.

Working of Powerloom Sector

The scholar went round some localities in Srinagar where many

of the Woollen Powerlooms are working. These localities were Now-

shehra, Hawal, Gulshan Mohaila, Sazgaripora, Gojwara. The major

powerlooms owners having more than 4 powerlooms per head were con

tacted and after detailed investigations, the follwoing conclusions

were drawn :-

326

1) Out of a thousand odd powerlooms which were installed slely

for the purpose of weaving *Raffal* cloth, only about 200 were

working. The rest were lying id le . The reason given for thi»

was that it is not economically feasible for them to run their

looms because they have to face cut-throat competition from

Amritsar weavers/dealers.

2) There is an acute shortage of weavers and other labourforce

in the state.

3) Due to the acute shortage of power, the looms cannot be run

for more than 8 hours in a day. As against this, the Amritsar

powerloom weaving units run their factories for complete 24

hours.

4) As a consequence of this, the production per loom is extre

mely low. The following table gives the comparative figures

of production of powerlooms in Kashmir Vs Powerloom in Anritsar.

TableComparative Production figures of powerlooms in Kashmir Vs Powerlooms

in Amritsar

Production per loom of average 'R a ffal ' cloth of 350 gms. weight

Powerlooms in Kashmir 5 kgs in 8 hoursor 5 rnts. of cloth per hour

Powerlooms in Amritsar 18 kgs. in 24 hoursor 6 metres of cloth per hour

327

.Thus against 5 kgs per hour per day production of Raffal

cloth in Kashmir, 18 kgs per loom per day are produced in Anritsar.

This consequently reduces their conversion changes and other over

heads as well. Besides, they use the cheapest possible raw material

(coarse y a m s in this case) to turn out the cheapest possible cloth,

Even though the quality of *Raffal* cloth from Anritsar is

not good at all , yet they flood the Kashmir markets with their

products, sell their cloth on at least 3 months' credit at very

cheap rates which induces the local shawl manufacturers to buy bulk

of their requirements from them at the cost of their own powerloom

weavers.

As per the figures supplied to this scholar by the Kashmir

Chamber of Commerce and Industry, out of an estimated requirement

of Rs.30 .0 crores worth of 'R a ffa l ' cloth, 70 per cent i . e . , Rs.21.0

ciores worth of 'Raffal* cloth is supplied by the Anritsar weavers/

dealers/merchants and only 30 per cent requirement i . e . , Rs.9.0

crores worth of 'Raffal* cloth is met by the production of local

weavers/dealers. This explains the plight of local *Raffal* power

loom weaving sector which is indeed depressing. The prospects too

are very, bleak as more and more powerloom units are becoming sick

and defunct and unless some immediate remedial measures are taken,

this sector would simply be doomed.

328

In order to save the 'R a ffa l ' cloth powerloom sector from

virtual collapse, it is suggested that the State Government should—

a) in itiate steps to rejuvenate the famous shawl industry of Kashmir

by providing incentives to i t , b) impose at least 10 per cent toll

tax at the point of entry in the state so that the cloth imported

from other states becomes dearer, c) impose quality control restrictions

for the 'Raffal* cloth as it is very necessary for ma^nf*nrtnyi'ng the

reputation and quality of shawls, d) provide incentives and other

fa c ilit ies to local weavers/powerloom owners so that they continue

producing 'Raffal* cloth in their units , and, e) take up with the

Central Government for allowing duty free import of wool in 22 /23

micron quality because this would reduce the incidence of raw

material cost on the total cost of the 'Raffal* cloth and make it

comparatively cheaper. Besides, the spinners would be encouraged to

use this fine quality of wool for spinning better quality yam s

suitable for the manufacture of 'R a ffa l ' shawls.

Implications of Price Increases in Wool

It must be said in defence of the weavers/powerloom owners of

both Anritsar and Jammu and Kashmir, that they were constrained to

produce the 'Raffal* cloth made from corase counts spun from coarse

27 micron wools instead of finer 22 micron wool because the price

difference of the two types of wool was considerable in the recent

years. In 1988, when the wool prices reached an all-time high, the

329

price per kg of 22 micron wool was 1280 Australian cents and that

of 27 micron wool was 760 Aistralian cants par kg. The prices ru

ling in the market for 4 8 s count y am made from 22 micron wool were

Hs.170/— per kg and the *Raffal* cloth too would cost Rs.170/— per

kg if the same was woven from 48s count y a m obtained from 22 micr

on wool. As against th is , the ruling price of 36s count y a m was

Rs. 153/- par kg which meant a cost of Rs. 153/- per kg of ‘ Raffal*

cloth as well. Hence the *Raffal* cloth used for the same shawl

in each case would cost Bs.153/- per kg only against Rs.170/- per kg

if it had been made from 4 8 s count y a m . This means a difference

of Rs.17/- per kg between the two counts or in otherwords *Raffal'

cloth made from 48* count y a m would be dearer by over 11 per cent

although in each case the end product is the same ie . the shawl

cloth. Wore recently towards the end of 1998, 36s count was selling

upto 20^1 ess than 4 8 s count price and hence the ‘Raffal* cloth

manufactured from 9 6 s count would be at least 20 per cent cheaper

than the one manufactured from 48s count.

s sThe main reason for using 36 count yam as against 48 count

y a m for the manufacture of ’ Raffal* shawl cloth as given by the

weavers/powerloom owners to this scholar, is that their consumers

ie . the shawl manufacturers/dealers have not been able to pass on

the extra burden of wool price escalation to their ultimate consu

mers. This compelled them to compromise on the quality of the

shawl which though is unfortunate but unavoidable.

3 3 0

Finally , the following conclusions could be drawn from the

above discussion

i) Since the state of Jammu and Kashmir is endowed with

rich material and human resources, the prospects of

industrialisation are bright,

i i ) however, an entrepreneur faces some teething troubles

as discussed above. He faces these problems both whilst

establishing his unit as well running the same on comm

ercial lines. This indeed has led to slow pace of

industrial development in the state,

i i i ) the plight of wool industry, in particular, es investi

gated above is very depressing. The mounting losses of

this industry year after year, both in the public and

private sector, have made this industry sick,

iv) the fluctuating wool prices only aggravates the sickness

of wool industry, and,

v) unless remedial measures, as suggested above, are taken

at the earliest, the wool industry would be steeped

further into deep trouble. It may then be too late to

rescue the wool industry of Jammu and Kashmir from total

collapse.

#**##

* # «

*

331

/

References

1. K o u l ,C .N ., "J&K,Rich in Gypsum and Limestone", Journal of

Commerce, 1976; p p .70.

2 . Department of Civil Investigation,J&K Government,

Survey Report 1982; p .5 .

3. Paper presented by Shri Nazir Ahmad, Director of Industries

in the Seminar on Industrial Development of J&K, Kashmir

Chamber of Commerce and Industry, September, 1988.

4 . Jammu and Kashmir State Industrial Development Corporation

( SIDCQ), Booklet on Incentives,1987.

5. Ib id , *

6 . Ib id ,

7 . Ib id ,

8 . Ib id ,

9 . Speech by Shri Moonis Raza, Chief Secretary/Chairman,

SIDOQ at SIDCO, ACM, 1988.

10.. Ib id ,

11. Ib id ,

12. Ib id ,

13. Ib id ,

L4. Ib id ,

15. Ib id ,

16. Ib id ,

17. J&K Govt., Digest of Statistics 1985-86,DOS(15 )86 ,

Directorate of Economics and Statistics, p. 141.

18. Ib id ,

19. Ib id ,

3 3 2

20 . J8.K SIDCO, “ All about Industrial Investment in J8.K",

1987; p . 10.

21. Ib id ; 1987; p . 11.

22. Ib id ,

23. Ib id ,

24. Ib id ,

25. Ib id ,

26. Ib id , 1987; p. 10

27. J8.K Govt. Digest of Statistics 1985-86, Directorate of

Economics and Statistics; p. 142.

28. Ib id ,

29. Annual Report of 54th A.G.M. of Kashmir Chamber of

Commerce and Industry, 2 .1 1 .1 9 8 8 ; p .4 .

30. Kashmir Chamber of Commerce and Industry, Srinagar Seminar

on Industrial Development of the State, September, 1988.

31. Jammu and Kashmir Industries L t d . , Srinagar, Draft Corporate

Plan (1989-95), V o l .I , 1988 ;p .5 .

32. J&K Sheep and Sheep Development Board (Wool Board)

Activity Report, March 1987; p .l .

33. JS.K Govt. Digest of Statistics, 1985-86, Directorate of

Economics and Statistics; p p .104 ,105 .

34. Ib id ,

35. Australian Wool Market Reports reproduced in Chapter 3.

36. Indian Wool Marieet Report, Ludhiana, December, 1980.

37. Himalayan Wool Combers L td ., Jammu. Annual General Meeting

Report, 1980, Annexure of Assembly Committee.

38. Ibid :

39. Ibid .

CHAPTER— VI INDUSTRY IN JAMMU AND...

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