Possibly enthused by the socialist celebration of nationalisation as a silver bullet for all things market, the nationalisation of textile mills failed to achieve the desired objectives of rehabilitating or reorganising them.
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The lack of modernisation by textile mill owners on one side and a violent labour collective that greatly strengthened the trade unions on the other turned one textile mill after another sick during the 1960s and the 1970s. With cloth production and jobs on the line, Parliament on 21 December 1974 used its first instinct — nationalisation — and enacted the Sick Textile Undertakings (Nationalisation) Act <1> to acquire sick textile units, reorganise and rehabilitate them to “subserve the interests of the general public by the augmentation of the production and distribution, at fair prices, of different varieties of cloth and yarn.” In one stroke, 103 sick textile mills were nationalised and transferred to the National Textile Corporation (NTC). The mill owners were collectively given Rs. 34.75 crore, while individual compensation ranged between Rs. 1,000 for 12 mills and more than Rs. 1 crore for seven mills, with a princely sum of Rs. 2.36 crore paid for Ahmedabad Jupiter, Spinning, Weaving and Manufacturing Mills. Two decades later, on 8 September 1995, the Act was amended <2> to allow NTC to transfer, mortgage or dispose of land, plant, machinery or other assets “for the better management, modernisation, restructuring or revival of a sick textile undertaking.” On 17 December 2014, the Act was amended again. The Textile Undertakings (Nationalisation) Laws (Amendment and Validation) Act <3> ensured that leasehold rights on the nationalised mills remained vested with the central government on payment of lease-hold rents. <4> It also stated that no court shall have jurisdiction to order divestment from NTC of the property vested in it by the central government. <5> The sale of land, allowed under the amended law, has resulted in the explosion of plush offices and residential buildings in Mumbai’s Lower Parel area, amongst others, and generated huge monies for the government. Possibly enthused by the socialist celebration of nationalisation as a silver bullet for all things market, the nationalisation of these mills failed to achieve the desired objectives of rehabilitating or reorganising them. Worse, they failed to deliver yarn, cloth, fair prices or jobs. Clearly, an industry needs more than a lazy law to keep it going.
<1> The Sick Textile Undertakings (Nationalisation) Act, 1974, Ministry of Textiles, Government of India, 21 December 1974, accessed 9 January 2018.
<2> The Sick, Textile Undertakings (Nationalisation) Amendment Act, 1995, Ministry of Textiles, Government of India, 8 September 1995, accessed 9 January 2018.
<3> The Textile Undertakings (Nationalisation) Laws (Amendment and Validation) Act, 2014, Gazette of India, Ministry of Law and Justice, Government of India, 18 December 2014, accessed 9 January 2018.
<4> Ibid., Chapter II, Section 2 (3).
<5> Ibid., Chapter II, Section 2 (4).
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Gautam Chikermane is a Vice President at ORF. His areas of research are economics, politics and foreign policy. A Jefferson Fellow (Fall 2001) at the East-West ...
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