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Saturday, July 20, 2024

Indian textile industry crisis as demand hits a low

It happened in Pakistan a decade back when power looms were sold as scrap to steel furnaces as producing fabric from them became unviable. Now, it is happening in India as well. A foundry in Coimbatore, Tamil Nadu, received 250 tonnes of scrap from a textile mill.

Industry players say that in the powerloom cluster of Somanur in Tamil Nadu, more than ten looms are being sold away every month at Devarayapuram village alone.

President of the Indian Cotton Federation (ICF) T.N., J. Thulasidharan, says the current distress in the textile and garment industry, which is predominantly part of the MSME sector, is similar to the situation in the late 1960s.

Reports from across India reveal that in the past couple of months, many factories across the textile value chain have either shut down and disposed of machinery or sold excess lands to stay in business; working hours have been reduced for laborers, impacting their wages; and the share of textiles and apparel in the Index of Industrial Production has shrunk.

In Andhra Pradesh, according to the A.P. Textile Mills Association, 8-9 mills have closed down, and more are on the verge of closure.  An officer bearer of the association said, “It [textile mills] is a first-generation industry in Andhra Pradesh. We used to export 30 percent of the yarn produced. Now, it is not even 5 percent. Cotton prices are high, electricity charges are up, and there is no support from the Centre or State governments.  An oft-repeated cause for the crisis is that the industry is going through a prolonged period of low demand in both export and domestic markets.

On the export front, shipment of textiles declined 0.41 percent in April-October 2023, compared with the same period last year, even as it grew 24.29 percent in October 2023 as compared to October 2022. Apparel exports saw an 8.08 percent degrowth in October and declined 14.58 percent in April-October 2023 compared to last year.

Raw material (fiber) constitutes 60-70 percent of manufacturing cost, which has turned expensive in India and severely impacted the industry’s competitiveness, says S.K. Sundararaman, chairman of the Southern India Mills’ Association. “Cotton prices crossed ₹1 lakh a candy in the last before the season (2021-2022), and still textile mills were buying. Now, cotton prices are less than ₹60,000 a candy, and there are no buyers,” said an official source.

The mill operators reveal that the average capacity utilization of the textile industry in Gujarat is 70 percent. The import of filament yarn has stopped because of the QCO. In the last two months, yarn price has increased by ₹5 a kg.

Spinners say the government should have introduced QCO on garments and fabric instead of fiber. While there are restrictions on the import of fiber, fabrics and garments are coming in mainly

Those who compete on prices are affected the most because of imports. With Bangladesh having duty-free access to the Indian market, those garments are available at 15-20 percent less cost in India.”

In the international market, too, Indian garment exporters continue to face price challenges. Buyers are cost-conscious, and despite the recent hike in wages in Bangladesh, Indian exporters do not expect a significant shift in orders. The overall cost difference between Indian and Bangladesh garments should be about 2-3 percent, but the labor costs are lesser by almost 30 percent in Bangladesh. With Bangladesh having duty-free access to the EU, Indian exporters cannot make inroads.

In clusters like Tiruppur, where the mainstay of the economy is the textile industry, rentals, retail sales, and restaurants are also bearing the brunt. “My godown has had no takers for almost a year now,” said Sakthivel, a realtor. Muthupandi used to stitch 1,000 pieces of garments a day at an export house, earning 50 paise for a piece. He now gets only 50 percent of the work. “Even the money to buy tea is given only as an advance amount to workers,” he says.

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