NTC's Pillai: Has Herculean job

In national textile Corporation's (NTC) bleak existence, there haven't been five months like what it witnessed between March and July this year. In those 153 days, the corporation, cobbled together in 1974 by nationalising loss-making textile mills across the country, raked in a whopping Rs 2,021.57 crore from the sale of 47.69 acres of textile mill land in Mumbai. That's more money than NTC-officially a basket case since 1992, when it was referred to the Board for Industrial and Financial Reconstruction (BIFR) for a revival plan-has ever made in its existence. Better still, it has more than 1,448 acres of textile mill land elsewhere in the country that could fetch another Rs 3,000 crore. (Actually, the figure could be higher because in Mumbai alone NTC has another 91 acres of land to go under the hammer.) Not surprisingly, then, there's a new glimmer of hope at the NTC headquarters in Delhi. Says its Chairman and MD, K. Ramachandran Pillai: "The additional income raised from the sale of land will go towards modernisation of mills and VRS (voluntary retirement scheme) expenditure."

Since April 2002, NTC has shuttered 65 of its 119 mills, and retired 47,723 of its 78,700 workers. The plan now, essentially part of the BIFR rehabilitation scheme, is to revive 51 mills. Here's how things are planned: Of the 51 mills, 22 (employing around 12,000 workers) will be revived by NTC on its own at a cost of Rs 511 crore. The remainder (29 mills, 13,000 employees) will be revived in partnership with private sector investors, who will be offered a majority stake of 51 per cent or 74 per cent. To critics of NTC's rehabilitation package, that seems like a perfect plan for throwing good money after bad.

No doubt, things at NTC have been improving since 2001-02. For instance, annual production of yarn is up from 304 lakh kg to 443 lakh kg, net revenue has risen to Rs 577 crore from Rs 412 crore, cash losses are down from Rs 404 crore to Rs 235 crore, and the wage bill has almost halved to Rs 271 crore. But NTC observers don't think the improvements justify another round of investment in assets that should ideally be just liquidated. Why? The global textiles market has become far too competitive for a player like NTC. It neither has the scale to be a low-cost manufacturer nor the technological capability to be a differentiated player, selling specialised yarn.

MILLS OF HOPE NTC has identified 29 mills for strategic private partnership. Here are some of the key ones.
MILLS	SELLING POINT
Kharar Textile Mills, Punjab	Good demand for its yarn
Suraj Textile Mills, Punjab	Proximity to Panipat handloom market
Mahalaxmi Mills, Rajasthan	Part of Bhilwara powerloom belt
Shree Bijay Cotton Mills, Rajasthan	Proximity to Ajmer handloom market
Dhule Textile Mills, Maharashtra	Exports 20-count yarn
Aurangabad Textile Mills	Smaller, but has good labour relations

Indeed, even some of the most competitive mills in India, like S.P. Oswal's Vardhman Spinning, are feeling the heat from giant Chinese exporters. Says Oswal: "China has scaled up its capacity, and the new quota-free market is throwing up new, intense competitors. The buyer is not looking at a company or a country, but simply a supplier from anywhere in the world who can compete in price, quality and delivery schedule. But for fear of losing, we should not run away. Competition needs to be fought as much by the companies as countries."

To be fair to NTC, its partnership plan does seem innovative. Here's how it will work: a special purpose vehicle (SPV) will be created for each of the partnerships, and NTC will hold equity as a sleeping partner in the SPV, which, in turn, will pay NTC quarterly or monthly lease rentals. NTC is even willing to offer these mills without any liabilities (including workers).

Yet, its hopes of partnering with the private sector may get dashed. Reason: While the mills up for partnership may be the more efficient ones within the NTC system, they are hardly comparable to the more efficient mills in the private sector. "The era of reviving mills with obsolete machinery and looms is over," says S.L. Saraf, a Surat-based textile entrepreneur, who worked with NTC as a sales manager for 13 years-1972 to 1985. "The deep-rooted problems of NTC have no cure, and I don't think NTC's idea of roping in private partners will have many takers." Adds Vijay Mathur, Director, Apparel Export Promotion Council, and another former NTC employee: "Many NTC looms (Mathur worked at the Burhanpur Tapti mills in Madhya Pradesh between 1979 and 1987, when the mill was gutted in a fire) were over 50 years old; some in mp produced as little as 32-35 metres of fabric in three shifts."

The irony is that, in private, even senior government officials admit their worst fear is the mills turning sick soon after modernisation. So why does the government want to go ahead with this elaborate circus of trying to revive NTC? The answer is obvious: NTC's revival has nothing to do with the economics of India's textile industry, but everything to do with the workers' political clout. At last count, NTC had 26,317 workers, affiliated to more than 250 trade unions. While that's a significant votebank for any government, for a Left-supported administration, it's an even bigger issue. Besides, as a government official adds, "(The revival) is legally binding on the government because of our commitment to the courts."

NTC's Finlay (L) and Minerva mills: Last year Finlay's cotton was given a rare marketing push

Sins Of The Past

Many of NTC's current ills can be traced to its genesis. Back in 1974, when the government, in a fit of political bravado, decided to take over sick textile mills almost abandoned by the private sector, the idea was to save the 1.5 lakh jobs at stake in 18 states and make these mills competitive by modernising them. However, when the modernisation bill was put at between Rs 3,000 and Rs 4,000 crore in the 1980s, the government realised that it had bitten off more than it could chew. As a result, the government invested just Rs 512 crore in NTC between 1974 and 1992, although it continued to spend significantly more on worker salaries (Rs 5,507 crore between 1974 and 2004).

Between 1974 and 1995, the textile ministry did come up with three or four rehabilitation packages, but none of them could be implemented, as the state governments weren't willing to allow sale of mill land. It was only in 2001 that the government mustered the courage to shutter unviable mills under the Industrial Disputes Act. That year, the government did have an opportunity to liquidate NTC, but political exigencies (besides the fear of NTC's prime real estate assets passing on to the inefficient liquidation process) ensured that no such thing was done. Instead, the government came up with a revival package, which involved converting government loans worth Rs 2,542.79 crore into equity and waiving off interest dues of Rs 1,454 crore.

Can the revival package help NTC achieve what it hasn't been able to for more than 20 years, and which is to become a globally competitive and profitable manufacturer? The modified BIFR plan does envisage NTC wiping off its accumulated losses of Rs 10,733 crore in another 10 years. But there are no guarantees from anyone whether by 2015 this white elephant would learn to dance.