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Business

Empty handlooms and dipping sales: Kanchipuram's weavers pin hopes on Budget 2019

Updated : June 26, 2019 05:18 PM IST

In July 2017, the goods and services tax (GST) regime brought with it tepid demand and slowing sales for Kanchipuram's famous silk sarees.

Data from multiple silk weavers’ associations in Kanchipuram show that the number of handloom units has dropped from 200,000 pre-GST, to just around 10,000 today.

Retailers and weavers alike are hopeful of some impetus from the Union Budget due to be presented on July 5.

For a temple town whose name is synonymous with that of Kanjeevaram silk, Kanchipuram hasn’t seen its silk saree retailers breathe easy since 2017. In July 2017, the goods and services tax (GST) regime brought with it tepid demand and slowing sales. The reason? A 5 percent GST on silk products — the value added tax (VAT) rate for these products was 0 percent. But with Union Budget 2019 just around the corner, there’s a glimmer of hope that things might change.

In S Meenakshisundaram’s tiny silk saree store on Gandhi Road, there are hardly any customers. Even on good business days, the proprietor of Arul Murugan Silks says he has more free time than before. His near-empty store is indicative of just how dull the district’s once booming silk retail scene has now become. The problem is simple: 5 percent GST on a silk saree priced between Rs 15,000 and 25,000 now means that customers are picky. Retailers in turn are left with no other option but to absorb costs and forego margins.

“For a silk saree costing Rs 15,000, I need a profit margin of 25 percent to run my store. But margins are barely 10 to 15 percent, now,” says Meenakshisundaram. “Now customers have begun shopping for fewer sarees — shopping bags of 20 sarees now have just two simple sarees.”

If GST is one side of the problem, rising input costs is another. Differential GST rates on raw silk, woven silk and procurement of gold fibre for silk sarees have meant that the tax component for weaving silk sarees is on the rise. Coupled with lukewarm sales, this hasn’t been good for business. “If the government helps us get some tax relief on high raw material costs for silk, we can cut prices and help our businesses get better,” says SP Vetri, manager at Kanchipuram-based NKS Silks.

Even as retailers struggle to keep businesses afloat, Kanchipuram is contending with another problem that could have far-reaching consequences on the handloom industry — there simply aren’t enough weavers turning up to work.

Data from multiple silk weavers’ associations in Kanchipuram show that the number of handloom units has dropped from 200,000 pre-GST, to just around 10,000 today. This situation has arisen because traditional handlooms are competing with better-equipped power looms, while paying the same 5 percent GST. As a result, hand-woven silk, the product of generations of family trade hasn’t found resonance among newer generations of weavers.

“The new generation needs to learn weaving,” says VK Dhamodharan, secretary of the Kanchipuram Silk Saree Manufacturers Association. “To make this happen, government subsidies for their training need to reach the grassroot level.”

Other stakeholders in the weaving industry feel the need of the hour is financial aid for existing weavers.

The writing is pretty much on the wall: tepid demand, smaller margins, and dying handloom units could sound the death knell for Kanchipuram’s renowned silk saree business. But retailers and weavers alike are hopeful of some impetus from the Budget.

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