Diagnostic Survey and Business Plan for

Handloom Sector in Bihar

Executive Summary
Submitted to Department of Industries,
Govt. of Bihar

Submitted By

INFRASTRUCTURE LEASING & FINANCIAL SERVICES LIMITED

1. Background
The State of Bihar amply illustrates “poverty in riches” paradox. Even when the State was
leading in terms of mineral resources in the country, this huge potential could never be
converted into reality. Since Year 2000, when the State got bifurcated and most of mineral
rich regions of Bihar became part of the State of Jharkhand, the challenges facing the state
economy have only grown.

Even as large parts of the country experienced the process of rapid industrialization over
last decade and a half of liberalization, the State of Bihar found itself bypassed and
untouched by this process. In fact, the State was witness to a process of deindustrialization
over this period. Far from attracting fresh investments, even existing industries started
getting closed down gradually.

Not surprisingly, Bihar remains one of the least developed states of India, with a per capita
annual income of Rs. 5,780 in 2003-04 against India’s average of Rs. 21,142. As has been
depicted below, this divide has become sharper in recent years, and while the state’s per
capita income was around 40 % of national figure in 1993-94, it got reduced to only 27 %
in 2003-04. Another important development indicator further confirms the dismal picture
of the state economy. Credit Deposit Ratio (CD ratio) of the state is less than half of the
national average. At 30.2, this is just one third of the CD ratio of the entire western region
and compares poorly with even neighboring states like UP (42) and West Bengal (57).

The State of Bihar is today at the most crucial juncture. After a long hiatus, the process of
development is again getting the requisite momentum. However, the State faces daunting
task of first catching up with rest of the country and then keeping pace with it. Considering
the potential of the state economy and its existing resources, the Govt. of Bihar has
decided to accord priority to sectors like food processing and handlooms.

It is in this context that IL&FS has been mandated by the Department of Industries, Govt.
of Bihar, for diagnostic survey and preparation of business plan for seven handloom
districts (clusters) in Bihar, viz., Gaya, Bhagalpur, Madhubani, Siwan, Biharsharief,
Darbhanga and Patna. These seven districts were identified by the Govt. of Bihar
considering their importance in the state handloom sector as also future potential for their
growth. The mandate was essentially aimed at coming out with a strategy for revival and
sustainable growth of the handloom sector in the state with a focus on increased income
opportunities for the weavers in the State.

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The assignment was started with a scanning of secondary data available about the
handloom sector in general and in particular about the status of the sector in the state.
Also, it was realized that a proper perspective of the sector in the state would necessitate
inputs from other prominent handloom clusters in the country. Thus, a visit was carried
out to Chanderi cluster in MP, which is one of the most prominent clusters in the country
and has also experienced UNIDO’s three year project intervention.

The diagnostic survey itself was carried out in two phases: qualitative and quantitative.
The survey, in the identified seven districts of Bihar, was aimed at identifying the
constraints precluding the development of the handloom sector with a specific focus on
the weavers. The survey also evaluated the efficacy of the delivery platform put in place
by the Government of Bihar manifesting in varied policies and programmes to improve
the income level of the weavers. The ultimate purpose of the survey was to come out with
credible inputs and database for the formulation of a sustainable business plan to
economically empower the weavers who represent the weaker sections of the society.

The survey attempted to understand the state environment for weaving sector by looking
at the socio-economic status of the weavers and matters like present production status,
demand and supply gaps, appropriateness of techniques and tools used, appropriateness
and relevance of designs in respect of market, present skill level and availability,
potential of the fabric produced for both domestic and export market, existing backward
and forward linkages, availability of credit for weavers in the clusters and finding out the
requirement for infrastructure.

2. Textile Industry

Indian textile industry plays an important role in Indian economy with significant
contribution to industrial production, exports and employment. The industry has high
growth potential given its inherent strengths such as abundant raw materials, low labour
cost and a thriving domestic and global market. With annual exports amounting to US$
13.5 billion and very low import intensity (1.2 %), Indian textile industry is the single
largest foreign exchange earner for the country. It also accounts for 14 % of industrial
output, 9% of excise collection and 18% of employment in industrial sector.

2. 1 Handloom Sector

In this age of rapid mechanization, Handloom evokes images of a bygone era. This
though is far from true. Even as the sector has seen gradual decline over the years, it
remains a significant component of the textile industry, providing employment to about
65 lakh persons in the country. It also contributes significantly to the country’s exports
with the sector contribution amounting to around US $ 550 million. More important, the
sector remains a source of livelihood for the most marginalized of our population. Also,

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the sector represents and preserves the legacy of our age old socio-economic traditions
and rich diversity like no other.

2.2 Stagnation and Decline

Often romanticized, the sector is today largely a story of impoverished weavers who are
fast migrating to large cities in search of alternative sources of livelihood and ending up
as unskilled labour for other sectors. The sector is passing through difficult days, as it has
largely failed to keep pace with the change in market conditions. Despite a slew of
schemes and programmes run by various government agencies for promoting the sector,
production in handloom sector has been continuously declining over the years. While the
total production of cloth has increased from 34,838 million sq. mtr in 1996-97 to 45,378
mill sq. mtr in 2004-05, the production of handloom sector has declined from 7,456
million sq. mtr to 5,722 million sq. mtr during this period. Thus, while the total
production of cloth has increased by about 30 per cent during this period, the production
of handloom sector has actually declined by about 23 per cent. The data available from
the Second Handloom Census (1995-96), the last such survey done nationwide, also
shows that total no. of handloom units in the country declined from 29.97 lacs in 1987-88
to 25.42 lacs in 1995-96. The no. of looms declined from 37.79 lacs to 34.86 during this
period. This has resulted in share of handlooms in total production of cloth coming down
from 21.40 per cent in 1996-97 to mere 12.61 per cent in 2004-05.

2.3 Regional Distribution

Handloom sector has great regional variations and some of the states like Assam and
Manipur have rich handloom traditions and dominate the sector. As per the Second
Handloom Census, the states of Assam (10.97 lacs), West Bengal (2.22 lacs) and
Manipur (2.15 lacs) together accounted for as much as 64 per cent of the handloom units.
Other states with major share were Tamil Nadu (2.02 lacs) Andhra Pradesh (1.45 lacs)
and Uttar Pradesh (1.42 lacs). Bihar (0.52 lacs) though accounted for merely 2 % of
handloom units.

3. Major Findings of Survey:

The findings of the survey clearly indicate need for a fresh lease of life for the sector.
The handloom sector in the state is fighting for its survival. Most of weaving clusters
have either switched to power looms or weavers have migrated in search of job
opportunities.

The diagnostic survey has found the sector in the state essentially dispersed and
unorganized and faced with several constraints to sustain itself. It is not surprising to note
that the problems faced by the weavers in all the clusters witness convergence at the

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macro level. The microelements may offer certain variations in terms of production
output but, by and large, the problems are in respect of obsolete technology, lack of
requisite skill set and enabling common processing facilities, lack of credit availability
and very weak market appreciation and linkages.

In all, 440 interviews were conducted in identified 7 districts. A summary of findings in

these districts (clusters) is given below :

Districts Estimated Estimated no. Major products Estimated

(clusters) no. of of Handlooms Turnover
weavers (Rs. in Lakh)
Biharsharief 225 200 Cotton Bed sheets and Silk 90
fabric.
Bhagalpur 15,000 12,000 Silk-based cloth-length 35,000
(Tasar, Muga, Katia, Eri,
Gicha, and Mulberry), bed-
sheets, scarves, stoles,
furnishing material and
dress material
Darbhanga 575 500 Towels and bed sheets 250
Gaya 675 500 Towels, bed sheets, silk 415
fabric, saris and blankets
Madhubani 500 400 Thaan (cloth), Dhoti, 180
Towels and Dasuti (rug).
Patna 850 700 Bed sheet and furnishing 340
items, Dusters and
bandages.
Siwan 1,850 1,550 Bed sheet, towel, waist-leg 730
wrap (lungi), and shirting.
Total 19,675 15,850 37,005

Around 93 per cent of weavers are still working on pit looms and only 7 per cent were
working on frame looms. Around 45 per cent of the looms did not have basic jacquard as
an attachment and only 29 percent of looms had dobby attachment. While the weavers
feel the need for upgradation of their pit looms to frame looms or with other technical
attachments to enhance productivity, resources remain a constraint.

This had a clear impact on the monthly income of the weavers. Of the weavers
interviewed, only 34 percent reported an income of over Rs. 3000 per month and around
52 per cent earned below Rs. 2,000 per month .

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Most of these clusters have Primary Weavers Co-operative Societies but these societies
have become defunct over the years. The withdrawal of Janata Dhoti and Sari Scheme
in early 1990’s along with decline of khadi sector were cited as major reasons for decline
of handlooms.

Majority of the weavers (around 57 percent) face problems in procurement of raw

materials, average volume of purchase of raw materials is low and quality of raw
materials for most of the weavers is low which would result in low value realization.
Only 15 percent of weavers reported quality of weavers as good.

Most of these clusters do not have organized dyeing centers with modern facilities like
water softening plants or dyeing chambers. On an average, 34 per cent of the weavers
had in-house dyeing facilities and 40 per cent had in-house facilities for finishing the
product. Of course, these facilities are very primitive and not suitable for high value
products. All this has significant bearing on quality of final products and resultant poor
value realisation by the weavers.

Among the sample weavers, only one-third of the weavers had gone through a process of
upgrading their skills, while majority admitted to not going through any skill upgradation
programme.

Non-availability of credit from institutional sources has been cited as one of the reasons
for the absence of independent enterprises. The most important source of credit reported
was of money lenders (34%), followed by family/relative/friends (25%) and banks
(19%). In most cases, weavers were not familiar with various schemes run by the banking
institutions for promoting credit to the weavers. The bankers were also found hesitant, if
not indifferent, to credit needs of the weavers. Most of the bankers also seemed worried
about ability or even willingness of weavers to pay back the loans.

An environment of ignorance with regard to government schemes and programs for the
betterment of their lot pervaded the clusters. In spite of various state govt. training
institutions for the weavers, most of weavers have not been able to take advantage of
them. It was clear that state govt. institutions, supposed to work for the purpose have
been mostly disconnected with the status of the sector and weavers. However, this has
also happened largely because of severe lack of resources with state govt. organizations,
both in terms of physical and financial resources.

Finally, lack of innovative designs, poor understanding of the market needs and
consequently non availability of market remains the biggest obstacle in the way of the
handloom sector in the state. It has to be understood that viability of the handloom sector
is dependent on it catering to niche and high value market, both in India and abroad. Low
value products, which can also be produced with power looms, can never sustain the
sector and weavers. This would therefore necessitate modern design, requisite skill
upgradation and market linkages with stress on brand promotion. A way forward can be

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 to capitalize on the recall value of such historical locations like Nalanda or Vaishali or
Mithila. Such marketing efforts combined with product development and innovative
designs can make huge difference to the fate of state handloom sector.

4. Proposed Business Plan

The proposed interventions along with budget outlay are given below:

Estimated Proposed
Sr. Project Cost Budget
Proposed Interventions
No.
(Rs. lakh) (Rs. lakh)

1 Upgradation of State training Institutes – Any 105 105

intervention in the handloom sector in the state has
to begin from upgradation of existing state
resources. This would be necessary for equipping
weavers with requisite skills. It is proposed to
provide a grant subsidy of Rs. 10 lacs for each
training centre and additional Rs. 25 lacs for Bihar
Institute of Silk and Textiles.

2 Revival of processing plants and co-operative 50 50

spinning mills-
This would be another important step in the
direction of revival of handloom sector in the state
as these plants would be required for effective
backward and forward linkages. The revival
exercise has to begin with valuation exercise which
would be required for inviting private investors

3 Modernisation/Upgradation of Looms – A major 1,000 500

initiative would be modernization of looms. This is
necessary for increasing production efficiency and
value addition to the products. In this context, (For 4,000 (50 % grant
induction of TARA looms or other such looms and looms @ Rs. for each
Jacquard/dobby attachment would be encouraged. 25,000 ) modern
It is proposed to provide a grant subsidy of 50 % of loom/upgradati
the cost of modern looms/loom upgradation to the on of loom
weavers in the state. subject to a
maximum of Rs.
12500 per
loom)

4 Handloom parks – Provision of infrastructure to 5,000 1,000

handloom units would be a priority. This may be
done in form of development of handloom parks
which would have modern enabling infrastructure (200 lakh each

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 Estimated Proposed
Sr. Project Cost Budget
Proposed Interventions
No.
(Rs. lakh) (Rs. lakh)
for weavers. An infrastructure subsidy of 20 % of for five
the cost of the project would be provided for handloom
handloom parks, not exceeding Rs 200 lakh per parks)
park. This would be in addition to the SITP grant
to improve the viability of handloom park.

5 Raw Material Bank – Procurement of quality 100 75

yarns and making them available to weavers at (50 % grant for
reasonable rates would be significant for increasing (For 10 civil
income level of weavers. It is proposed to provide depots @ Rs. construction ,
subsidy of 50 % for civil construction needed to set 5 lakh for with a
up raw material banks in the state. Also, a one time civil maximum of Rs.
grant of Rs. 5 lakh would be given as initial construction, 5 lakh for each
working capital for each raw material bank . 5 lakh for depot, and
working working capital
capital) of Rs. 5 lakh for
each depot)
6 Dyeing Centres – Major handloom clusters would 60 45
also require dyeing centres (water softening plant, (For 5
dyeing chamber, ETP etc.) to make the product dyeing
marketable in the national market. Such centres centres @ Rs.
would be provided 75 % subsidy on civil 12 lakh )
construction and plant and machinery.

7 Post weaving/Finishing/Packing Centres – There 100 75

would be post weaving centres/finishing and
packing centres in major handloom clusters which (For two
would have facilities of screen/block printing, centres @Rs.
surface beautification/embroidery etc. Two such 50 lakh)
finishing centres would be initially supported with
75 % subsidy on civil construction and plant and
machinery.

8 Design and product development– Handlooms 50 50

would have to bring in innovative designs for
attracting the modern consumers. This may be
done through a series of training
programmes/workshops focusing on design inputs
largely based on local motifs. Leading designers of
the country would be invited to the state for a close
interaction with weavers
9 Brand-building & Market Promotion– This 300 300
would be the most significant initiative for

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 Estimated Proposed
Sr. Project Cost Budget
Proposed Interventions
No.
(Rs. lakh) (Rs. lakh)
handloom sector in the state. A major brand
building exercise would be undertaken (which may
use names such as Nalanda and Vaishali) to make
the state products have a brand recall not only in
the national but also export market.

There would also be an effort to link the weavers

here to the national and international market
though exposure visits, buyers-sellers meets,
participation in exhibitions etc.

10 Group/Federation formation and related 100 100

capacity building –
The weavers in the state would need to be brought
together in major clusters of the state in form of
SHGs and Federations. This would be required to
undertake collective activities like setting up of
yarn depots/common facilities centres, micro credit
linkages and also in general take advantage of
economies of scale. This would then require
intensive capacity building exercise in the state.

11 Project Development, Implementation and 100

Management – The success of all the above
(Project
initiatives would require engagement of
development
professional agencies for on project development
and
and implementation. In particular, project
Implementation
management agencies would be required for
charges)
setting up of handloom parks, raw material banks,
dyeing centres etc.

Total 6,865 2,400

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5. Implementation Mechanism for Proposed Business Plan

It is being acknowledged today that the schemes/programmes being run both by central and
state governments have suffered in delivery due to lack of professional management. Also,
project development has a crucial role to play in execution of any programme. The project
development component involves identification of right stakeholders/beneficiaries and
structure projects in keeping with the guidelines of the schemes/programmes. Thus, it is
proposed to bring in an innovative effort to engage professional agencies for project
development and implementation of various proposed interventions for handloom sector.

The state government may constitute a Project Approval and Monitoring Committee (PAMC)
headed by Industrial Development Commissioner (IDC) which may have Director of
Industries, Director (Handlooms), Director (Technical Development) and other state govt.
officials as the members. PAMC would be responsible for approval of projects relating to
proposed interventions including handloom parks. PAMC would also have a mechanism for
regular review of progress of the projects.

The Programme Management Agency (PMA) would be an independent professional agency

with multi disciplinary skill set and would be positioned for developing the projects under
the scheme and hand holding them through the entire life cycle (from “concept to
commissioning”).

The primary role of PMA would be to assist the Project Approval and Monitoring Committee
in effective implementation of the proposed interventions. Thus, PMA will be providing need
based technical support to the PAMC and Office of Director (Handlooms) to ensure that the
projects are identified and implemented in keeping with the guidelines. The roles and
responsibilities of PMA shall include information dissemination and creation of awareness
about the state govt. programmes, project identification, preparation of detailed project
reports, structuring the special purpose vehicles, financial closure, assistance to SPVs in
project execution and management, release and utilisation of state govt. grant, coordination
with central Government and other agencies/ institutions, monitoring and reporting etc.

6. Impact of Business Plan

The proposed interventions are aimed at turning around the handloom sector in the state with
a focus on providing sustainable employment opportunities to the weavers. The proposed five
handloom parks, each having around 2,000 handlooms, will lead to installation of 10,000
handlooms. In addition, weavers in other clusters are proposed to be provided support for
4,000 additional handlooms. A total of 14,000 handloom units would be providing
employment to 35,000 people (Assuming one handloom providing employment to one
weaver and 1.5 workers). Revival of three co-operative spinning mills and two processing

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plants are likely to generate employment for further 2,500 persons. In all, the proposed
interventions are likely to generate employment for around 40,000 people in the state.

Compared to only 34 per cent of weavers getting income of over Rs. 3,000 per month
presently, the proposed business plan is likely to ensure a minimum income level of Rs. 3,000
per month for all the weavers who would be part of proposed handloom parks and other
proposed initiatives.

Finally, the proposed business plan, if implemented successfully, can make significant
contribution to the textile sector in the state as a whole and, in particular, can help revive the
khadi sector, which would have huge positive spin off for the state economy.

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