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BUSINESS:
TEXTILE INDUSTRY
Dressed
To Kill
Shutdowns,
idle looms, stagnant markets and cheap imports-the industry is fighting
battles on several fronts with its hands tied
By Rohit
Saran
On
June 12 this year, power supply to Mafatlal Industries' two textile mills
in Mumbai was cut off for non-payment of electricity bills. On the face
of it, this was a rather trifling reason for the shut down of mills owned
by a Rs 436-crore company. But given the Rs 170-crore losses the two mills
had piled up since 1997, the power cut-off was just the preamble to an
inevitable closure. Mafatlals' was the 92nd textile mill to have shut
down since April 1999-the highest rate of mill closure since Independence.
In all, 350 textile mills are shut today.
 |
| "Due
to shortsighted policies, excess capacities stalk mill." - Hrishikesh
Mafatlal, CEO Mafatlal Industries |
The ones
that aren't closed are not doing much better. Arvind Mills, the world's
third largest producer of denim and promoter of brands like Excalibur,
Flying Machine, Lee and Arrow, posted losses of Rs 271 crore in 1999-2000.
JCT Mills and Modern Syntex each bled over Rs 100 crore last year (see
chart). Companies like Bombay Dyeing and Madura Coats managed to show
profits only by generating other incomes (income not from main business
activity).
|
THE
NEW COLOURS
|
What
the new textile policy could offer
» Uniform
excise duty for all fabric producers
» Freer
import and export of cotton and cotton yarn
» A
more attractive VRS
» More
incentives for modernization of mills
» Partial
lifting of small-scale reservation on garments and knitting
|
So, is the
Indian textile industry fading into the sunset? Or is it the darkness
before the dawn? After all, the country's cloth production hasn't fallen.
Last year, the industry produced 38 billion sq m of fabric. More importantly,
exports of textiles and readymade garments grew by 9 per cent in 1999-2000
and now stand at over $14 billion (Rs 63,000 crore). That's more than
a third of India's total exports. India is also the world's largest exporter
of yarn, with 25 per cent share of the global yarn market.
Whether
it is dusk or dawn that awaits the textile industry, its present is indisputably
dark, some positive flashes notwithstanding. "On the face of it,
fabric production may be growing, but we are feeding on the future. Excess
capacities stalk every sector of the industry, thanks to the shortsighted
policies of the past 15 years," says Hrishikesh Mafatlal, CEO of
Mafatlal Industries.
From raw
cotton to yarn to fabric to garments, every link in the textile industry's
value chain has been rusting for years, making it difficult for the industry
to survive the future. Especially after December 31, 2004, when most existing
barriers to global trade in textiles are set to fall. That would not only
unleash a flood of imports of cheaper and better fabric and garments into
India but would also make the export market far more competitive. Indian
exports enjoy some amount of protection under the quota system of textile
trade and this comes to an end on the last day of the year 2004.
"India
appears complacent and ill-prepared to live up to the challenges it must
face in the coming years," warns Arvind Singhal, managing director
of KSA Technopack, a consulting firm which recently did a study, jointly
funded by the Textiles Ministry and the FICCI, on the Indian textile industry.
Admits Atul Chaturvedi, joint secretary in the Textiles Ministry: "It's
a little late in the day to debate strategies to counter and capitalise
on an open textile trade system. By now we should have had appropriate
policies in place."
Especially
so, given the complicated structure of the textile industry. From cotton
growers to garment sellers, the industry engages 35 million people directly
across four different stages of activity. Each stage has its own problems,
as much of economics as of politics.
Yarn manufacturing
is the most organised segment of the industry. It's also the only state-of-the-art
section in an industry besieged with technological obsolescence. No wonder,
it is also the most competitive segment. Indian exports of yarn have grown
by 32 per cent a year since 1993 and companies like Vardhman, Indo Rama,
Nahar Spinning and Madura Coats have together captured one-fourth of the
world's yarn market. But yarn accounts for a minuscule proportion of global
textile trade-just about $7 billion out of the $350 billion annual trade.
Moreover, the growth in yarn trade is also the slowest. Explains Yogesh
Malhotra, a textile analyst with credit rating agency ICRA: "Rather
than trading in yarn, most yarn producing countries prefer to convert
it into fabric and garments which fetch much higher prices." That
points to the Achilles' heel of the Indian textile industry-weaving.
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