India: Khadi Reform and Development Program

Sovereign Project | 42151-013 Status: Approved


ADB is helping India revive the khadi industry and boost employment. The project will support policy and institutional reforms to promote the making of the widely revered handspun and handwoven cloth. It will establish a "khadi mark" to indicate the product is genuine and a marketing organization majority-owned by the private sector, and facilitate the purchase and processing of raw materials.

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Consulting Notices

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Project Name Khadi Reform and Development Program
Project Number 42151-013
Country India
Project Status Approved
Project Type / Modality of Assistance Loan
Technical Assistance
Source of Funding / Amount
Loan 2452-IND: Khadi Reform and Development Program
Ordinary capital resources US$ 150.00 million
TA 7142-IND: Capacity Buidling for Reforming the Khadi & Village Industry Subsector
Japan Special Fund US$ 2.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Private sector development
Sector / Subsector

Finance - Small and medium enterprise finance and leasing

Gender Equity and Mainstreaming Gender equity

Khadi and Village Industries Development Program aims at increasing employment and income in the Khadi and Village Industries (KVI) subsector of rural nonfarm sector. It supports ADB's core strategy of inclusive social development, as it will benefit rural poor and small producer organizations, who/which are dependent on the KVIs for their income. The Program aims at:

(i) establishing a policy reform and implementation framework to carry out the intended reforms;

(ii) promoting and marketing khadi by establishing a khadi mark and a majority privately owned marketing organization (MO);

(iii) enhancing raw material production and procurement efficiencies, introducing market-linked pricing, shift to production incentives in lieu of sales rebate, assessing working capital for khadi institutions and facilitating access to working capital, encouraging entrepreneurs, and empowering artisans; and

(iv) implementing institutional reforms in Khadi and Village Industries Commission (KVIC), revitalizing khadi institutions, building capacity and synergizing with village industries.

Project Rationale and Linkage to Country/Regional Strategy

While over 70% of the Indian population resides in rural India and 56% draw their sustenance from agriculture, agricultural productivity has been decelerating. As a result, the agriculture sector is unable to absorb the large rural work force even at subsistence levels. This has resulted in widespread rural poverty. Also this has shifted the focus to rural non-farm sector (RNFS).

The RNFS has immense potential to generate new jobs with relatively low direct investments, by utilizing local skills and resources or by meeting local demands by adopting simple technology. Khadi and village industries (KVI), originally promoted by Mahatma Gandhi in 1920s for rural self employment, are integral to the RNFS and identified by the 11th Five Year Plan as one of the subsectors with significant prospects for employment. At the time of project processing, KVI subsector employed nearly 9 million people. Therefore, KVI subsector of RNFS sector is considered particularly important for rural landless, women and marginalized group as it can have a significant impact in reducing rural poverty.

Impact Enhancement of income and employment growth for the rural nonfarm sector.
Project Outcome
Description of Outcome Revitalized KVI subsector provides sustainable employment to artisans with higher earnings.
Progress Toward Outcome The program is at an institutional level of implementation and yet to reach the artisan level.
Implementation Progress
Description of Project Outputs

1. Policy reform and implementation framework is estabilished to carry out the proposed reforms.

2. Khadi is effectively promoted and marketed to ensure commercial viability as well as generate market demand for khadi.

3. Procurement and production efficiencies are realized to remove major constraints in the khadi production value chain.

4. Institutional reforms are implemented to restructure KVIC, revitalize khadi institutions and develop synergies between Khadi and traditional village industries.

Status of Implementation Progress (Outputs, Activities, and Issues) The loan is for an amount of $150 million to be disbursed in 4 tranches only. The first tranche worth $20 million was disbursed when the loan became effective by February 2010. The loan was originally scheduled to close in September 2011. It was extended twice, till September 2013 and then till September 2015. Currently the loan is in its second tranche with $40 million yet to be disbursed. The second tranche release requires compliance with 31 conditions, which require significant capacity building of implementing agency (KVIC). The loan is in its second tranche because of the complexities involved and the sensitive nature of the tranche conditions. One of the more challenging issues being faced right now is private participation in marketing organization which is central to the program. Another challenging tranche condition is PPPs in central sliver plants for which limited response has been received from the bidders. There have been various high-level meetings between Department of Economic Affairs, Ministry of Micro Small and Medium Enterprise, and Asian Development Bank to monitor the progress under the loan. The loan as well as the associated capacity building TA are scheduled to close on 30 September 2015.
Geographical Location India
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects Likely to have minimal or no adverse environmental impacts.
Involuntary Resettlement Has no involuntary resettlement impacts. No further action is required.
Indigenous Peoples Not expected to have impacts on Indigenous Peoples. No further action is required.
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation

KVIC conducted two national level program dissemination workshops with 300 KIs in Delhi and Mumbai. The workshops were about key objectives and work streams under the program. Subsequently, there were state and division level workshops across the country.The KIs participated in their respective state and divisional workshops, where the work streams were discussed in detail. KVIC also conducted workshops with KIs earlier to factor in their views about MO and their readiness to associate with it. During the workshop, the KIs were briefed about Khadi Mark, public private partnership (PPP) in central sliver plants (CSPs) and in MO. KVIC has also organized workshops to get the inputs from KIs and prospective private parties towards structuring the PPP model for CSPs and MO.

KVIC has already initiated the process of organising KRDP implementation workshops in each of the six zones with participation from Khadi Institutions, KVIC state/divisional/zonal officials and KVIB officials. The purpose of these workshops is to disseminate the implementation process of various interventions under KRDP and to build the capacity of concerned Khadi Institutions and KVIC officials, to effectively guide the Khadi Institutions on implementation of KRDP interventions like Direct Reforms Assistance, Khadi Mark Implementation, Sliver Capacity Augmentation, Implementation of New Ventures amongst others. Training material is being developed to raise awareness on environmental aspects through dissemination programs. Regarding gender elements, a curriculum is being developed by KVIC for gender mainstreaming and trainings promoting financial literacy for the Khadi women artisans are being finalized. A workshop was held in January 2015 with participation from KVIC officials and KI staff from the states to build awareness on the gender mainstreaming aspects.

Business Opportunities
Consulting Services Not applicable. Consulting services support is captured under an associated TA (TA 7142-IND, Capacity Buidling for Reforming the Khadi & Village Industry Subsector).
Procurement Not applicable. Procurement towards consultant support to EA and IA is under a associated TA (TA 7142-IND, Capacity Buidling for Reforming the Khadi & Village Industry Subsector).
Responsible ADB Officer Ashis Bhadra
Responsible ADB Department South Asia Department
Responsible ADB Division India Resident Mission
Executing Agencies
Ministry of Micro, Small and Medium Enterprises
Mr. Sesh Kumar Pulipaka
171, Udyog Bhawan, New Delhi-11011
Concept Clearance 09 Jun 2008
Fact Finding 17 Jun 2008 to 23 Jun 2008
MRM 30 Jul 2008
Approval 02 Oct 2008
Last Review Mission -
PDS Creation Date 07 Jul 2008
Last PDS Update 15 Sep 2015

Loan 2452-IND

Approval Signing Date Effectivity Date Closing
Original Revised Actual
02 Oct 2008 22 Dec 2009 02 Feb 2010 30 Sep 2011 30 Jun 2016 -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 150.50 Cumulative Contract Awards
ADB 150.00 02 Oct 2008 20.00 0.00 13%
Counterpart 0.50 Cumulative Disbursements
Cofinancing 0.00 02 Oct 2008 20.00 0.00 13%

TA 7142-IND

Approval Signing Date Effectivity Date Closing
Original Revised Actual
02 Oct 2008 22 Dec 2009 22 Dec 2009 30 Sep 2011 30 Jun 2016 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
2,000,000.00 0.00 0.00 0.00 0.00 0.00 2,000,000.00 02 Oct 2008 1,306,273.77
Title Document Type Document Date
Khadi Reform and Development Program Progress Reports on Tranche Releases Jan 2010
Loan Agreement for Khadi Reform and Development Program between India and ADB dated 22 Dec 2009 Loan Agreement (Ordinary Resources) Dec 2009
Program Agreement for Khadi Reform and Development Program between ADB and Khadi and Village Industries Commission dated 22 Dec 2009 Project/Program Agreement Dec 2009
Khadi Reform and Development Program Reports and Recommendations of the President Sep 2008
Khadi Reform and Development Program Design and Monitoring Frameworks Jul 2008

Safeguard Documents

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Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

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Evaluation Documents

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Related Publications

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