Chennai: Textile mills in Tamil Nadu, hit by extended power cuts, are thinking of moving to Maharashtra and Gujarat, both of which have been wooing them with incentives and subsidies.
“We have witnessed power problems since 2008 but it has just become worse with 10- to 14-hour power cuts a day, which has not only resulted in production losses but also cost escalation to run diesel gensets,” said K. Selvaraju, secretary general, Southern India Mills Association (Sima).
Tamil Nadu accounted for 47% of the total yarn production of the country in 2010-11. The textile units there are largely dependent on states such as Gujarat, Andhra Pradesh and Karnataka for 95% of the 10 million bales of raw cotton that they need.
Maharashtra and Gujarat have unveiled new textile policies and plan to attract Rs.40,000 crore and Rs.20,000 crore of investment, respectively, in the next five years.
There has been no addition of spindles in the last two years, said S. Dinakaran, chairman of SIMA and also joint managing director of Salem-based Sambandam Spinning Mills. He doesn’t see any new investments in capacity expansion in the state. Tamil Nadu has 23 million spindles and used to add 700,000 to 800,000 spindles a year. The power situation in Tamil Nadu is a matter of concern, said Amol Kotwal, associate director, energy and power systems practice, Frost and Sullivan.
Power shortage was 18-19% in September. Currently, most parts of the state are going without electricity for up to 16 hours a day, Kotwal said.
Wind energy had helped tide over the power crisis in the state in May-September when generation from the source was the highest.
Two weeks ago the Maharashtra principal secretary for textiles visited Coimbatore and offered incentives to Tamil Nadu-based textile units to set up operations, said T. Rajkumar, managing director of Sri Mahasakthi Mills.
At least 20 of 350 Sima members in Tamil Nadu have showed interest in shifting their base to Gujarat and Maharashtra, Selvaraju said.
Once Gujarat elections are over later this year and the new government is in place, more Sima members will decide, he said. Some Sima members find the incentives compelling but are waiting to see if the situation in Tamil Nadu will improve, Dinakaran said.
The two states offer interest subsidies, single window clearance but it is Gujarat that offers refund on value added tax on spinning mills for new and additional capacity, power tariff concession and support for energy and water conservation, Rajkumar said.
Although the Tamil Nadu government has been promising an improvement in the power situation in 2013, the ground reality is different as the new power generation projects are small and will not be sufficient to meet the growing demand, said J. Thulasidharan, managing director of Palani-based Rajaratna Mills, which is planning to take up the Maharashtra offer.
“We plan to shift 65% of the 70,000 spindles and machinery from the mill in Palani to Maharashtra,” said Thulasidharan. “We are in the process of scouting land in the state to set up base.”
As spinning mills operate with thin margins, they can’t afford to bear the additional costs involved in coping with the power situation. Close to 10% of the Rs.120 crore revenue goes into the cost of running diesel gensets and production losses from the power cuts.
Kotwal also said any improvement in the power situation was a long way away, given the “deficit scenario”. He said a combination of measures were needed, including raising power generation capacity, reducing transmission and distribution losses (currently about 18%) and tariff hikes.