Hyderabad: Textile and apparel companies in India, the world’s second-largest producer of textiles and garments after China, are likely to witness bottlenecks in capacity expansions because of delays in getting machines and long lead times for equipment.
Domestic capital goods makers, who at present meet about 30% of the textile industry’s needs, are unable to meet the growing demand for machinery and are taking up to two years for deliveries. Foreign players, except those from China, are also unable to deliver machines before six to eight months.
The bottleneck in deliveries comes about two years after global quotas on textile exports were eliminated and Indian textile companies rapidly expanded capacity. India’s textile industry today accounts for about 23% of the world’s spindle capacity and a third of the global weaving capacity.
Meanwhile, there’s no sign of a slowdown in investments. The Union government has cleared 26 major projects worth nearly Rs2,500 crore under the Scheme for Integrated Textile Parks and has plans to set up 100 more textile parks across the country. And, with an aim to upgrade textile machinery, it has increased support for such efforts to Rs900 crore in 2007-08 from about Rs525 crore last fiscal.
“However, to achieve this, a substantial increase in capacity building is needed in the area of domestic textile machinery manufacturing sector,” said D.K. Nari, the secretary general of Confederation of Indian Textile Industry. Machinery imports in 2006-07 accounted for Rs7,100 crore, up from Rs5,502 crore in 2005-06.
When Hyderabad’s Priyadarshini Spinning Mills Ltd wanted to expand a year ago, it couldn’t wait for machinery deliveries from major domestic supplier Lakshmi Machine Works, which had a backlog of around 20 months then. “The European players were also suffering from low capacities and backlogs of over eight months, and we chose to import machinery from a Chinese player,” said Priyadarshini’s managing director Harish Cherukuri.
Says K.V. Sooriyanarayanan, vice-president of finance at Visaka Industries, a textiles yarn maker from Hyderabad, “We had placed orders for ring frame from LMW for our Nagpur expansion around eight months back and are expecting the delivery in another three-four months.”
The spinning industry supply crunch could ease in the years ahead as companies such as Lakshmi, which accounts for over 60% of the domestic market share for textile machinery, aggressively expand their own capacity by over a quarter to 3.5 million spindles.
“But the demand is far higher than the capacities that the domestic machinery manufactures can build. We are booked till December 2008,” said Virendra Oberoi, general manager of Kirloskar Toyoda Textile Machinery Ltd, which has augmented its capacity by 40%. Other players include Trumac Engineering Co. as well as a local arm of Zinser GmbH.
According to ATE Group, it is not enough for just the machinery makers to scale up capacity; they need the support of the ancillary industry around it. “It consumes significant time for the capital goods industry to upgrade its manufacturing capacities,” said Anuj Bhagawati, managing director of ATE Group, which controls two textile machinery ventures and a marketing company with Trumac and Zinser brands.
The government plans to attract about Rs140,000 crore investment into the Indian textile sector in the Eleventh Plan period, 2007-12, with an aim to push India’s textile and garment exports to $40 billion (Rs1,70,000 crore) from the current $12 billion.