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Rediff News  All News  » Business » Textile exports are loosely spun

Textile exports are loosely spun

September 11, 2003 08:43 IST

S P Oswal, Sanjay Lalbhai, Chintan Parikh, Rajendra Hinduja ... they may be among the biggest textile exporters in India, but are hardly household names like N R Narayana Murthy and Azim Premji, although textile exports in India are currently around 50 per cent higher than software exports.

This, in a nutshell, is the biggest challenge the textile industry, which includes spinning, weaving and garmenting, faces as it attempts to treble exports by the end of the decade --it is too fragmented.

In the spinning sector, which is dominated by large units with small-scale units accounting for just over 7 per cent of the production, India's share in global yarn trade is 26 per cent.

However, in the weaving sector, where large mills contribute less than 4 per cent of the output, India's share in global trade is just around 3 per cent.

Why are large units so important? Explains consultant Arvind Singhal: "WalMart has just placed a trial order for 46 million pairs of Levi's Signature label of jeans. This requires 60-70 million metres of cloth of the same quality and consistency. Since few mills in India can deliver such huge quantities of cloth, how can one expect domestic garment units to deliver such a large export order?"

Assuming that WalMart will sell at least two shirts per pair of jeans, which means another 120-130 million metres of consistent quality cloth, it is not an order that a fragmented industry can even aspire to meet.

With textile quotas set to be abolished in the next 15 months, world trade is expected to surge, and India is aiming to grab a huge chunk of it.

The government is targeting $50 billion of textile exports by the end of the decade, against around $13.5 billion now. This will require around Rs 98,000 crore (Rs 980 billion) of fresh investments. In comparison, investments in the textile sector over the past few years have been just Rs 4,000 crore (Rs 40 billion) per year.

Despite the huge export potential, few in the textiles industry appear in any hurry to invest. S P Oswal, executive chairman of Mahavir Spinning and chairman of Vardhaman Mills, is one of the country's top exporters and plans to double Vardhaman's weaving capacity to 50 million metre a year.

But he said, "We have to see how the market develops and will be in a position to decide only by around March next year." A sentiment reiterated by Indian Cotton Mills Federation chairman Chintan Parikh, whose Ashima Group is also a big exporter: "Right now, my target is to increase the share of exports in the total production from 40 per cent to 60 per cent, and then decide on expanding capacity."

Oswal, however, pointed out that capacity addition was not a time-consuming task and could be done in a year's time.

The biggest obstacle to greater investment till now has been the government's policy, which gives huge excise concessions to the powerloom sector, making larger units unviable since these duty sops are usually the margins on which the smaller units compete.

However, with the Budget for 2003-04 removing these concessions, and bringing smaller units into the excise or cenvat chain, this unfair advantage has gone.

Says Parikh: "If larger mills don't invest now, they have only themselves to blame." Getting them to do that, however, is easier said than done.
Sunil Jain