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Committee recommendations to review Khadi Industries

Committee recommendations to review Khadi Industries

The Central Government had constituted the following Committees to review the existing structure, functioning and performance of Khadi Village and Industries Commission(KVIC) to study the regulatory framework and to recommend any other measures considered necessary to revamp the KVIC.

1.      High Power Committee headed by late Prime Minister Shri PV Narasimha Rao

2.      Arthur Andersen Study

3.      Expert Committee under the Chairmanship of Shri. D.M. Sukthankar, former Chief Secretary Govt. of Maharashtra

High Power Committee (HPC) was constituted under the Chairmanship of late Prime Minister Mr. P. V. Narasimha Rao to review the performance, examine the issues and identify the problems faced by the KVI sector.

The Committee in its report submitted in 1994 made various recommendations. The key recommendations of the Committee were:

●       All apex financing Institutions and commercial banks to be advised to increase the flow of institutional credit to the KVI sector.

●       Rebate for Khadi may be replaced by ‘Market Development Assistance’ (MDA), calculated at 20% of production

●       Necessary legislative measures to protect “Khadi” and its use by KVIC certified Institutions;

●       Separate wing in KVIC to supervise the working of Sliver Plants; smaller economical sliver plants to be set up at the Institutional level

●       Village industries under the purview of KVIC to be considered on par with Government level village and small industries category for planning and development purposes.

●       Government to constitute a separate fund (Rs. 2000 crore) for rural industries to be administered by NABARD or a separate financial institution.

●       Focus on select industries for development where KVIC has expertise and experience

●       Development of the export capability of KVI Institutions; strengthening quality control, augmenting training (participatory funding scheme for KVIB and NGO run new training centres) and research facilities

●       Creation of a special cell at the KVIC headquarters to oversee and monitor the KVI programmes

●       Transition to Project Approach for financing (from Pattern Approach)

●       Commission to delegate day to day functions to the CEO and Financial Advisor and focus on developmental rather than regulatory activity

●       Measures for strengthening of KVIBs

Based on the recommendations of the High Power Committee the following changes were brought in the KVI Sector:

The REGP scheme was commissioned in 1995-96 with the objective of providing a formal channel for flow of funds from banking institutions to the KVI sector.

The Government of India framed a new scheme for KVIC to take online credit facility (Consortium of Bank Credit or “CBC”) of Rs. 1000 crore.

Arthur Andersen study was commissioned in the year 2000 with the objective of reorganizing the KVIC organization structure with respect to the changing business needs and overall objectives of the KVIC.

The Committee in its report made various recommendations. The key recommendations of the Committee were:

●       Redefinition of “Commission” under the KVIC act, 1956 in line with change from an operational body to policy formulation body.

●       At the Commission level, the KVIC to not only comprise representatives of the KVI sector but the officers of the KVIC to also participate in its policy making and, therefore, the CEO, FA and the heads of Khadi and VI departments to be appointed as voting members of the Commission.

●       At the operational level, KVIC to structure itself into separate business units to meet the distinct requirements of Khadi and Village Industries.

●       The roles and responsibilities of internal functions, such as Capacity Building, Marketing & Sales, Research & Development, Human Resources, Finance, etc, which are integral to the organization’s performance, to be defined and communicated clearly.

●       KVIC should set up industrial clusters catering to a groups of skilled artisans at the district/block level

Based on the recommendations of the Arthur Andersen study the CEO and FA were made ex-officio members of the Commission and voting rights were also conferred.

Ministry constituted Expert Committee under the Chairmanship of Mr. D.M. Sukthankar, former Chief Secretary Govt. of Maharashtra, in 2005 to review the existing structure, functioning and performance of KVIC to study the regulatory framework and to recommend any other measures considered necessary to revamp the KVIC.

The Committee in its report submitted in March, 2005 made various recommendations. The key recommendations of the Committee were:

●       Need for identification of select traditional and sunrise industries as focus areas; a cluster-based approach to revival of traditional industries;

●        Recognize technological up-gradation and modernization as a priority area for transforming the sector; suggested mobilization of existing technical and scientific Institutions, such as, ITIs, Engineering Colleges, IITs, CSIR as resource/contact Institutions for rural industrialization and creation of venture capital fund within KVI;

●         Recommended brand building, standardization and quality control for products of KVI Sector;

●        Address the organizational and training issues preventing the growth of the KVI sector and suggested setting up of Zonal Committees and Zonal offices under a Deputy CEO, and restructuring of training programme aimed towards entrepreneurial development;

●        Commented on issues related to Khadi Institutions, namely, dues on account of Rebate, stock pile-up and state of implements; Suggested alternatives to Rebate

○         direct subsidization of spinners

○         encouraging entrepreneurship among spinners/weavers through formation of Self Help Groups

●        Governance related recommendations

Based on the recommendations of the Expert Committee the following changes were brought in the KVI Sector:

·           Introduced Scheme of Fund for Regeneration of Traditional Industries (SFURTI) to organize the traditional industries and artisans into clusters to make them competitive and provide support for their long term sustainability and economy of scale.KVIC took up several projects under an interface with reputed Technological institutions viz. IITs and NITs for developing new technologies and their subsequent dissemination among institutions and entrepreneurs of KVI Sector.KVIC have introduced ‘Khadi Mark’ to ensure genuineness of Khadi to the customers.Zonal Committees have been constituted for each of six geographical zones to monitor timely implementation of KVI programmes/schemes for the development of Khadi and Village Industries in the zone.The Ministry of MSME has revised the negative list and brought in a large number of new industries/projects like spinning and weaving, solar charkhas hand loom/power looms under the ambit of Prime Minister’s Employment Generation Programme (PMEGP). Government of India introduced the scheme of Market Development Assistance (MDA) on Production in place of rebate after experimenting with several pilot schemes. The scheme has been given effect from 1st April 2010, to help Khadi institutions to reorient their activities extending adequate emphasis towards increasing artisans’ earnings as well as ensuring quality of Khadi to customers. Under MDA scheme 25% of assistance is earmarked for payment among spinners and weavers as additional incentive through their bank/post office account.An online application system has been made operational for disbursement of Market Development Assistance (MDA) and Interest Subsidy under ISEC scheme to KIs and artisans as applicable.Under PMEGP, online disbursement of MM subsidy through single National level nodal bank has been developed. This Press Release is based on information given by the Minister of State for MSME Shri Giriraj Singh in a written reply to a question in Lok Sabha on 10.04.2017 (Monday).

KVIC Schemes

To improve the quality of Khadi products and to ensure their better acceptability for marketing, KVIC is implementing schemes like Market Promotion and Development Assistance (MPDA) Scheme, Khadi Reform and Development Programme (KRDP). The details of the Schemes are as follows:

i) Market Promotion Development Assistance (MPDA) – MDA scheme of KVIC has been modified as MPDA scheme formulated as a unified scheme by merging different schemes/ sub-schemes/components of different Heads implemented in the 11th Plan, namely, Market Development Assistance, Publicity, Marketing and Market Promotion.  A new component of Infrastructure namely setting up of Marketing Complexes /Khadi Plazas has been added to expand the marketing net worth of Khadi & VI products. Under the erstwhile MDA scheme financial assistance was distributed amongst Producing Institutions (30%), Selling Institutions (45%) and Artisans (25%). Under the Modified MDA (MMDA) financial assistance is distributed amongst Artisans (40%), Producing Institutions (40%) and Selling Institutions (20%).

ii) Strengthening infrastructure of weak Khadi institutions and assistance for marketing infrastructure:  This scheme was launched in 2009-10 and provides need-based support towards the Khadi sector for nursing the sick/problematic institutions elevated from “D” to “C” category as well as those whose production, sales and employment have been declining while they have potential to attain normalcy and to support creation of marketing infrastructure in other identified outlets. Under this scheme, financial assistance is provided to existing weak Khadi institutions for strengthening of their infrastructure and for renovation of selected khadi sales outlets. The Pattern of Assistance for Strengthening of Infrastructure of Existing Weak Khadi Institutions:


Total Cost (Rs. in lakh)

Preliminary and Pre-operative Expenditure


Capital Expenditure


Working Fund




The Pattern of Assistance for Marketing Infrastructure:


Funding Pattern

Govt. Grant

Inst’s Contr.


Departmental  Sales Outlets of KVIC

Govt. Grant – 100%




Departmental Sales Outlets of KVIBs

Govt. Grant – 85%

Inst. Contr. – 15%




Institutional Sales outlets (Metro cities)

Govt. Grant-  75%

Inst. Contr. – 25%




Institutional outlets

(Non-Metro cities)

Govt. Grant –  75%

Inst. Contr. – 25%




 iii)        Khadi Reform and Development Programme (KRDP): In order to fully realize the significant growth potential of KVI Sector, in terms of employment generation, enhancing the earning of artisans and ensure positioning of Khadi in consonance with the current market needs, a comprehensive reform programme captioned Khadi Reform and Development Programme (KRDP) was approved by Government of India and is being implemented with the assistance from Asian Development Bank (ADB).

The objectives of KRDP are: 

Revitalizing the Khadi and Village industries through strategic/policy level reforms and institutional reforms to achieve the following goals:

i)          Sustainability of Khadi

•           Repositioning of Khadi and linking to market needs

•           Selective subsidy

ii)        Artisans Welfare

•           Greater involvement

•           Better remuneration and quality of life

•           Thrust on Traditional Village Industries

Direct Reform Assistance (DRA) is given to Khadi Institutions for increasing their productivity and ensuring better quality of products as well as for renovation of their sales outlets for better marketing of Khadi products.

In addition to above, following initiatives have also been taken to enhance the production and sales of Khadi & Village Industries products: 

1)   To ensure higher wages for artisans, the rate per hank has been increased to Rs.5.50 from Rs.4.00.

2)        Simplified approval process of budget target to Khadi institutions has been adopted.

3)    Khadi certification process has been simplified and made online to enable new companies to start Khadi ventures from 2.10.2016.

4)     KVIC has been catering to the need of bulk buyers such as, Defence, Health & Family Welfare, Paramilitary Forces and other Ministries of Central & State Governments under Rate Contract (RC) agreement with Directorate General of Supplies & Disposals (DGS&D) as well as supply of Non Rate Contract (Non-RC) items like Polyvastra bed sheets and pillow covers to Railways, etc.

5)    KVIC has signed a Khadi Mark Registration Agreement with Raymond for promoting Khadi fabrics and ready-mades through Raymond’s dealers/showrooms/outlets in India and abroad.

6)    Tie ups to increase marketing network with Raymond’s and Arvind Mills to market the Khadi Denim across the world.

7)  Efforts are being made to make khadi products more appealing and competitive in the market by engaging designers of international fame viz. Ms. Ritu Beri as “Honorary Consultant”.

8)  Efforts have been made to make Khadi products on-line and as a part of this initiative tie up arrangements with M/s. Paytm has been made and launched through Khadi Gramodyog Bhavan, New Delhi.

9)   For sale of Premium Khadi, Khadi Lounges are being opened at Delhi, Mumbai and Jaipur.

10)   Organizing Domestic Exhibitions for promoting sales of Khadi and VI products. KVI units are also motivated to participate in international exhibitions for which financial support is extended up to a maximum limit of Rs.1.25 lakh under international co-operation scheme of Ministry.

11)   KVIC as a part of its aggressive marketing efforts introduced “Gift Voucher Scheme” for its patrons from Departmental Sales Outlets (DSOs) at Delhi, Kolkata, Mumbai, Goa, Patna, Ernakulam & Bhopal and Visakhapatnam Airport. The ‘Gift Voucher Scheme’ consists of attractive ‘Gift Vouchers’ in the denomination of Rs. 500/-, Rs. 1000/- and Rs. 5000/- respectively has been launched.

12)  Special Exhibitions at Ahmedabad, Vadodara & Mehsana  (Gujarat), Kakinada & Rajamundry (A.P.), Shivsagar & Nazira (Assam), KGB Mumbai, KGB Delhi, Panaji, Dehradun (Uttarakhand) and Jaipur (Rajasthan) where employees will purchase Khadi by coupons given by Oil & Natural Gas Corporation Ltd. (ONGC).

Under the scheme of ‘Strengthening infrastructure of weak Khadi institutions and assistance for marketing infrastructure’, Rs. 4.99 crore has been disbursed by KVIC to Khadi Institutions (KIs) for modernization of 100 sales outlets of KIs during the current financial year i.e. 2016-17 (upto 28.02.2017). Financial Assistance of Rs. 10.00 lakh has been provided to conduct various Evaluation Studies.

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