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Detailed Agenda of the meeting to

Discuss ‘Launching of Pure Wool

Mark in India’ and to consider the

Proposal of ‘Punjab Woolcombers

Ltd.’ for JV & PPP for Pashmina

Wool Development’

Central Wool Development Board Ministry of Textiles

Govt. of India

19th

March,2012

New Delhi

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Agenda 1. Launching of Pure Wool Mark in India

The Central Wool Development Board has received a proposal from

Shastri Market Association, Amritsar for Launching of Pure Wool mark by

the Ministry of Textiles on the same lines as the MOT has launched ‘Silk

Mark’ or ‘Handloom Mark’. The Association mentioned that they are small

scale manufacturers of High Quality ‘Pure Wool’ shawls, blankets and other

items for which they often need quality certification. They can not afford

‘Wool mark’ label of the Australian Wool Innovation being very expensive.

Moreover it appears to be more inclined towards Big Woollen Units in

comparison to Small Units.

Pure Wool Mark will create awareness among the consumers about the

woollen products in general and its purity , quality aspects in particular and to

have a logo for quality certification and generic promotion of wool for wool

processors, manufacturers, exporters, traders and consumers. To introduce

Pure Wool mark in country, following steps/initiatives are required to be

taken-

• Formation of a ‘Pure Wool Mark Organization of India’ a separate

organization under Ministry of Textiles.

• After its formation, finalize its ‘Memorandum of Association, which

will include Members (Permanent, Special, Associate, Ordinary),

Financial Resources, Duties and Responsibilities of different

Committees, AGM and other BYE-LAWS.

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• Establishing of accredited Wool Testing Laboratories of international

standard having ISO-NABL certification, along with sufficient well

qualified manpower, infrastructure at various places for testing of

various products of the license users.

• Design of new logo/hologram and apply for its registration.

• Finalize the agreement to be signed with Authorized Users

(Manufacturers/Traders/ Exporters/Others).

• Registered the members as Authorized Users and to sign Agreement

with them.

• Receive registration fees, collect service charges, resolve disputes &

differences and enforce discipline.

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Agenda 2 : Proposal of Punjab Woolcombers Ltd for Joint

Cashmere Development through JV and PPP with LAHDC

Introduction

Punjab Woolcombers has send a proposal for Joint Cashmere

(Pashmina) Development through JV and PPP with LAHDC for upliftment of

Ladakhi people by introducing the modern method of animal husbandry to

increase the Pashmina production from 50 tons to 500 tons per annum in the

next 7-8 years and ensure good returns to Pashmina growers by eliminating

middlemen.

In the proposal PWL intends to set up a Wool Processing Unit at

Jammu for cashmere yarn including a start-of – art de-hairing unit ,

marketing of cashmere products along with important technical know-how

from various parts of the world by entering into JV with LAHDC.

Joint Venture

A. PWL’s contribution in the JV will be as:

In the JV, PWL will transfer its woolen spinning plant with an

estimated capacity of manufacture 30 tons of cashmere blended yarn every

year. The machinery like Blending machine, Woolen card, Ring frame and

Cone winder one each. Apart from this PWL will also transfer its worsted

spinning division having capacity of 35 tons per annum like Gill

Boxes(3Nos.), Bobbiner (1No.),Ring Frame(3Nos.),Cone winder, Cheese

winder and Twisting machine one each.

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Dyeing facility, Looms for producing fabrics, Lab equipment including

DNA testing) are proposed to be installed along with efforts for marketing of

cashmere products and making available technical know-how.

B. LAHDC’s contribution in the JV will be as :

a- Purchasing of new de-hairing plant (Italian)of 100tons capacity

b- Providing land and building for the manufacturing unit with the

support of J&K Govt. at Jammu.

c- To give complete purchasing rights of raw cashmere for 30

years.

PWL and LAHDC will also enter into a PPP on terms acceptable to the

Government for carrying out the vast socio-economic welfare program,

allocation of monetary resources, whereas PWL can ensure the quick

implementation of development work with introduction of best animal

husbandry practices and technology for increased production and productivity

of raw cashmere at grass root level. In the PPP following objectives will be

obtained:

1-PPP will take measures to uplift the life of nomads in to phased

manner in next 7-8 years by helping in Education, Health Care, Employment,

Sleeping shelters, Community centers, food and water.

2-PPP will take steps to increase the production of raw Pashmina by

providing help for- shelter for goats, fodder banks, reduce mortality rate in

kids, establishment of mini farms, veterinary support and health care, good

Pashmina combs, nutrient supplements, fodder harvesting, procurement of

bailing machine, training to breeders, incentive on livestock rearing.

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Marketing plan-Although Ladakh produces small quantity

Pashmina but still there are some hurdles in marketing like inconsistent

quality, no private participation, poor lab equipment and absence of

certification. To address these issues PWL has tied up with an international

trade mark for accreditation ,leverage its domestic and international agents

and buyers and earmarked fixed output for local shawl industry

Capital investment

PWL-Rs.25Cr.

10Cr in woollen spinning

6Cr. In worsted spinning

0.50Cr. in Dyeing

0.50Cr. in Looms

1.0Cr.in Technical Know-how

2.0Cr.Lab. equipment

In terms of some old &new machinery, and modifications in some

machinery

LAHDC- 10Cr for de-hairing machine,

4.50 Cr. for building,

0.50 Cr. Land(Lease amount)

Govt. Support

Central Govt.- 20.0Cr.for social welfare and animal husbandry

10.0Cr. for de-hairing machine

J&K Govt.-To provide land, building, power connection and

incentive(Tax and duty incentive)

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Immediate Action Plan-

MOU between PWL&LAHDC for a Joint Venture

Visit of PWL officials to Ladhak

The project proposal of PWL and the technical comments from Wool

Research Association(WRA) are enclosed as Annx.-I&II respectively.

Role of CWDB: From the proposal , role of the CWDB is not clear as

proposal requires Rs. 20.0 Crs for social welfare and animal husbandry of

Pashmina Goat which can’t be covered under any of the existing or proposed

scheme ( As recommended by sub Group ) of the CWDB.

As per proposal PWL will transfer its Wool processing machineries to

Jammu for which Land shall be provided by State Govt. which is also not

seems to be very prudent and will be lengthy and if Pashmina is to be

transported from Leh to Jammu then same Pashmina can be transferred to

Ludhiana in the existing set up of PWL.

On the proposal comments of LAHDC are also not available whether

they are agree to this or not as there is already established Pashmina de-

hairing plant at Leh and due to inadequate supply of Pashmina is

underutilized.

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Annexure - II

WOOL RESEARCH ASSOCIATION, THANE.

WRA/21/ 1447 /2011-2012 3 March 2012 Smt. Sunaina Tomar Joint Secretary Ministry of Textiles Government of India Room No.271, Udyog Bhawan New Delhi 110 107

Sub : Proposal of Punjab Woolcombers Ltd for JV & PPP for Pashmina

Madam,

As desired, our comments on PWL’s proposal is forwarded as an attachment. On the face of it, the proposal does not appear to be implementable in its present

form. Neither, in our considered opinion, the J.V. and PPP would bring much benefit to the pashmina growers and local people of Leh. In the J.V., PWL would apparently invest Rs. 25 crores, out of which Rs. 16 crores will be in the form of old machines to be shifted from their plant in Ludhiana. Though they claim to have global clout, an amount of Rs. 5 crores has been shown as their investment for International Trade Mark. Lab equipment and utilities investment will be Rs. 2 crores, which appears to be too high. On the other hand, the Partner of the J.V. Company and PPP viz LHDC is allotted the role mainly to bring monetary resources from the Central and State Government. In the PPP, PWL will not invest any amount and will probably provide holistic support. Strong side of the proposal is that PWL being an established industrial house, will be able to explore market, bring technical knowhow, ensure quality and productivity, global acceptance of pashmina products, etc, provided it has lesser priority on profit making at the cost of LHDC and poor pashmina growers of Leh.

Hope our examination could bring out the strong & weak points of the proposal.

Thanking you, Yours faithfully,

(M.K.Bardhan) Director Encl : As above

Copy to : Executive Director : w.r.t. your email dated 22 Feb 2012 Central Wool Development Board, Ministry of Textiles, Govt. of India, C-3, Shastri Nagar Circle Jodhpur, Rajasthan– 342 003

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COMMENTS OF WRA ON PWL PROPOSAL FOR J.V. & PPP FOR PASHMINA

SALIENT FEATURES OF PWL PROPOSAL

WRA COMMENTS

1. J.V. (PWL & LHDC to form a 74 : 26 J.V.) According to the proposed investment of PWL (Rs.25 crores) and LHDC (Rs.15 crores) the JV ratio will be 62 : 38 not 76 : 26

2. PPP (PWL & LHDC)

• For carrying out ‘vast socio-economic welfare programme’ with greater involvement of the Government in terms of monitoring and allocation of monetary resources.

• PWL to ensure quick implementation of developmental work, alongwith introducing best practices and technologies of animal husbandry for increased production and productivity of raw cashmere at the grass root level .

• PWL to introduce modern methods of animal husbandry and increase the pashmina output to 500 tons per annum in next 7 – 8 years.

It appears major involvement will be of Central / State Govt. in respect of monetary resources. PWL will not have any financial involvement Statement is vague and requires detailed explanation. ‘Modern Methods’ are not elaborated. To increase output from current 35 – 40 tons to 500 tons in 7 – 8 years appears to be an over estimation

3. PWL will make following contribution in J.V.

− Machines / equipment for Woollen System of Spinning Blender (1 No), Woollen Card (1 No), Ring Frane (1 No) Cone Winder (1 No)

− Machines/equipment for Worsted System of Spinning (Gill Boxes (3 Nos), Bobbins (1 No), Cone Winder (1 No), Cheese Winder (1 No), Twister machine (1 No)

− A small number of looms

− Lab Equipment

− International Trade Mark

− Technical knowhow

Comments given in Annexure A

4. LHDC will provide following as a partner of J.V. :

− Dehairing m/c (Preferably Italian make) with annual capacity of 100 tons. PWL will select the machine

When present production capacity of Pashmina is 35 – 40 tons, the J.V. will require to import remaining quantity of raw Cashmere. Existing Dehairing m/c at

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and ensure commissioning of the machine.

− Land & Building to be provided by LHDC from the State Govt. in Jammu rather than Leh.

− Complete buy – back rights.

− In order to ensure that other private companies do not take advantage, LHDC shall get the JV Company tied up with all pashmina procuring co-ops for total purchase right of raw cashmere in Leh-Ladakh region for 30 years, to be renewed with first right to the JV.

− Estimated Investment by PWL will be Rs.25 crores and LHDC Rs.15 crore. J.V. – 74 : 26

− Estimated Turnover on full Capacity Utilisation – Rs. 80 – 90 crores.

Leh also will be operative. The proposal is to set up the plant at Jammu thereby reducing employment opportunity at Leh. Buy back rights and 30 years, purchase right of raw pashima will lead to monopoly of PWL eliminating competition. This reflects inner desire of PWL to eliminate its competitors from pashmina business. PWL’s investment includes old machines and the ratio of J.V. will be 62:38 for PWL : LHDC – not 74 :26 as claimed. Full utilization of the proposed plant requires 100 tons of raw pashmina, which will not be possible to achieve. With even double output the estimated turnover will be around Rs.20 crores

5. Public Private Partnership (PPP)

− In the first phase PPP will apply for grants of Central Govt upto Rs.20 crores by adopting 16 – 17 villages to carry out welfare activities.

− Welfare activities will increase the output of raw pashmina from 50 tons to 90 – 100 tons within 2 years of investment.

− With successful phase – 1, PPP will get support from World Bank, Asian Development Bank, etc. Central Govt will dedicate more resources.

− PPP will carry out Social Welfare Programme (CPEP) to raise the

CWDB has already been working on large no. of Pashmina Grower families. Why PWL should not contribute Rs.20 crores instead of Central Govt? It is doubtful to increase output of raw pashmina to 90 – 100 tons in 2 years. One cannot be sure. Idea is good. Implementation requires to be well planned / monitored.

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quality of life of the farmers, tribes, nomads, etc with education, healthcare, employment, sleeping shelters, community centres and food and water.

− PPP will take measures for increasing production by CPEP (Cashmere Production Enhancement Programme) by increasing number of goats, shelters for goats, fodder bank, Improved Rearing Techniques, Reduced Mortality Rate in kids, Establishing of Mini Farms, Veterinary Support, Better Equipment, Nutrient supplements, Fodder Harvesting, Providing bailing machines, better training breeders, Incentives on live stock rearing, bringing experts for continuous improvement, etc.

− PPP will improve production of raw pashmina form 250 gm to 500 gms per sheep and yield from 29-32% to 43 – 48%.

− Improve quality of Pashmina as per Global Standard.

− Herders to breed more pashmina goats.

Parameters identified are appropriate. PWL & LHDC’s role also should be fixed in respect of responsibility / accountability. These parameters should be linked with increase in production to achievable target. Difficult to achieve. Q.C., Goat rearing management, scientific evaluation, etc will be required, LHDC to play its role.

6 Marketing Strategy :

− PWL having tie up with an international trade mark accreditation agency will ensure international buyers to purchase pashmina

− PWL shall leverage its legacy network to ensure easy marketability of pashmina products of J.V.

− J.V. shall earmark a fixed output to the local Kashmiri Shawl industry to offer benefits to them and to utilize international Trade Mark.

PWL being in the global business of wool, should be in a position to provide marketing assistance, customer development, etc. However, they have shown Rs.5 crore required for Trade Marking.

7. Financial Indicator

− For J.V., PWL will provide Rs.25

Woollen System of Spinning is not

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crores with break up : Woollen Spg (Rs.10 cr), Worsted Spg (Rs.6 crs), Dyeing (Rs.0.50 cr), Looms (Rs. 0.50 cr), International Trade Mark (Rs.5 cr), Technical knowhow (Rs.1 cr), Lab Equipment (Rs.0.50 cr).

− For J.V., LHDC will provide Rs. 15 cr with break up : Dehairing m/c (Rs.10 crore), Building (Rs.4.5 crore), Land (Rs.0.5 cr).

− The machines to be contributed by PWL are second hand machines requiring overhauling & modification.

− New addition (preferably Italian make) may also be required.

suitable for pashmina. Worsted machineries for spinning of wool would require major modification for quality woollen yarn. Considering the targeted product mix of tops /yarn, Dyeing m/c., looms, etc are not required. Why PWL having global clout should require to spend Rs.5 crores for Trade Mark? An impression is created that LHDC will be used to harness resources from Central / State Govt. PWL’s role in JV becomes questionable considering its intension to shift old machines from its plant at Ludhiana. Details are not given

8. Government Support

− For J.V. Central Govt. to provide grants for Rs. 30 crs. (Dehairing m/c – Rs. 10 cr and Social Welfare & Animal Husbandry – Rs.20 Cr)

− Five acres land to be provided by J&K Govt in Jammu, not in Ladakh (Rs.0.5 crores – lease amount)

− J&K Govt. to provide a building of 30,000 sq.ft space (Rs.4.5 crores)

− J&K Govt. to provide power connection of 1 MW.

− J&K Govt. to support tax and duty incentives.

The proposal to gather Rs.30 crore from Central Govt. and Land, Building, power and tax incentives from State Government leads to an impression that PWL bends upon the Govt. finance through LHDC. It harps on limited stake on its part.

9. Immediate Action Plan

− MOU between PWL and LHDC to be signed.

− PWL shall sign a contract to procure 25 tons of raw material in 2012.

PWL will have major say in running the business of J.V. for its own advantage, while LHDC will be used to harness Government resources and

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− PWL shall appoint a recognized consultancy firm to prepare detailed project Report.

− PWL will interact with pashmina Co-ops and local villages for confidence building.

− LHDC will engage State and Central Govt. to recognize the project as a high priority one.

help.

10 Future Planning & Vision

− J.V., to be located at Jammu, would look to scale up dehairing facility in 3 phases over a span of 8 years.

− In the first year capacity of dehairing will be 100 tons, 4th year 150 tons and 8th year 250 tons.

− JV will install 3 – 4 looms in the 1st phase to get an idea about the downstream of pashmina products.

− Legality of MOU, profit sharing, each others participation etc will be drawn and firmed up.

J.V. should be located in Leh for the benefit of this backward region so that pashmina growers gets maximum benefit. Availability of raw pashmina being very limited, it is a matter of debate how the dehaired pashmina at the end of 4th & 8th year would increase to 150 tons and 250 tons, even if the production of the fibre increases 2 – 3 folds. - -

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WRA : TECHNICAL APPRAISAL OF PWL PROPOSAL ON J.V.

a. Woollen spinning machine may not be suitable for pashmina.

− Pashmina /cashmere fibres being costly, delicate and fine fibres, it is not

wise to process them on woollen spinning system meant mainly for coarse

counts.

− It is better to avoid this process line and contribution of PWL in form of old

woollen machineries, as proposed, is not an acceptable proposition.

b. Without metallic worsted card, worsted line is incomplete.

− Contribution from PWL for worsted process line did not include worsted

card. Without the card, further process line is of no use. Technically it

may be expedient to go in for cotton flat card for processing pashmina

fibres for spinning.

− Worsted machineries used for wool is not suitable for spinning pashmina,

but if modifications are made in the carding, gill boxes, combing, roving

and spinning, involving high investment, fine spinning upto 50 Nm can be

possible which can give much value addition to the pashmina products.

c. Reassessment of contribution of Rs.25 crores by PWL is to be made.

− Clear picture of new machineries and modifications as proposed by PWL

in the proposal are to be assessed for including in the process line.

− Technical expertise and lab equipments and utilities as proposed is to be

assessed for their monetary value.

d. Loom and dyeing facilities are not required as per planned product-mix.

− Products proposed in the cashmere product mix / cost benefit analysis

statements doesn’t justify requirement of loom and dyeing equipments.

− Total capacity as proposed in the proposal is 100 M.T. dehaired products,

for which there has to be 250 M.T. of raw pashmina production. But at

present the availability is 35 M.T., which my at best increase to 70 M.T., if

joint venture and PPP are implemented properly in the next two years.

That means the production of dehaired pashmina will be hardly 28 M.T., if

the production of raw pashmina could be enhanced to 70 M.T.

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e. Present turn over can be only 11 crores

− At present the production of raw pashmina is 35 M.T. Considering a yield

of 40%, the dehaired pashmina production is hardly 14 M.T. and the

revenue generation will be around 11 crore if dehaired pashmina is sold as

it is without further processing it to combed tops and further to yarn.

− After two years of implementation the production of dehaired pashmina will

be 28 M.T. for which the turnover of 22 crores is expected.

f. Two more dehairing m/c is needed to be installed to fulfill the shortfall.

− At present the production of raw pashmina is 35 M.T. One dehairing

machine is already installed at Leh which is covering 25% of the need of

dehairing. 3 – 4 machines of the same capacity or else 2 machines of

Italian make will be sufficient to cater to the needs of present production.

− It is not practical to say that the output of raw cashmere can be increased

from current 50 tons to 90 – 100 tons within 2 years of investment as said

in the proposal.

g. Price /kg of pashmina yarn is doubtful.

− Price/kg quoted in the cost benefit statement for pashmina yarn is doubtful.

− Tops means carded tops or combed tops (not mentioned)

− It is necessary for the PWL to give list of machinery to be overhauled and

modified. What kind of new machinery addition is proposed to be added

in the process for cashmere yarn?

− Investments shown against machinery are not shown in detail against each

machinery.

− Cost of dehairing machine mentioned for provision from LHDC is to be

examined.

− Technical evaluation of woollen and worsted spinning machineries and

modifications and overhauling as proposed in the proposal, is to be made.

− Actual contribution of PWL by way of machinery can only be accessed

through technical evaluation.

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− Dyeing facilities, loom, lab equipments have been shown as an additional

investment by the PWL as these facilities are not in the list of contribution

in the form of machineries in the Joint Venture.

− Assessment of trademark and technical knowhow as a part of PWL is to be

made in terms of money.

− Italian dehairing m/c with output capacity of 100 MT as said in the proposal

is doubtful and the production capacity of this machinery is to be

investigated.

− proposal.

− Complete buy back right is to be discussed with breeders co-operative

societies.

− Annual production of pashmina in India is 35 MT instead of 50 MT as

mentioned in the proposal.

− Presently Changthang Pashmina Breeders Co-op Societies at Leh is

looking after procuring raw pashmina directly from breeders and dehaired

pashmina is sold out through Societies. The extent of involvement of

middleman in the trade is to be investigated as said in the proposal.

− End users’ exploitation in the pashmina trade as said in proposal is

doubtful.

− Detailed program is to be sought, for assessing how the joint program can

take the pashmina output from the current 50 MT per year to 500 MT per

year in the 7 – 8 years time frame as proposed.

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