Ethiopia offering ready-to-use sheds, income tax breaks, training subsidies, and a tax-free gateway into the US, Europe and China is the reason why Indian textile mills are turning to Ethiopia.
KPR Mills, one of the major textile mills from Tirupur, Tamil Nadu, has started a unit in Ethiopia to take advantage of lower labor cost, duty savings, and shorter shipment time to the US and European markets.
KPR joins the list of other prominent peers such as Raymond, Arvind, Best Corporation and Jay Jay Mills. All these companies feel it will be difficult to take on the competition from Bangladesh, Cambodia and others, with their made-in-India products. So, they hope their Africa investments would bring a new wave of growth.
Moreover, labor is available for $60 per month compared to $130-$150 in India — almost 50 per cent lower. Besides the labor cost, another big advantage is that the Ethiopian government already has the land and buildings readily available. Power, too, is cheap in Ethiopia. Compared to 10 to 12 cents in India, Ethiopia offers power at three cents.
P Nataraj, managing director, KPR Mills said, “The duty on made-in-India products ranges from 10 to 18 per cent in Europe, which can go up to 28 per cent. However, there is no duty levied on products from Bangladesh. So, in terms cost and price, they have an advantage.”
Now, despite a difference of 10-18 per cent in duty structure, India is still able to compete with such countries because of the abundance in availability of raw cotton. In case of Bangladesh, they have to depend on outside countries.