Costs, competition hit Tirupur textile exports

Costs, competition hit Tirupur textile exports

Kochi: Overseas sales of knitwear output of Tirupur, the town in Tamil Nadu known as a hub of India’s textile industry, are likely to grow no more than 5% in the year to next March, as competition from Asian rivals and higher production costs crimp local producers.

Raging battle: Units are battling higher fuel and raw materials costs, increased wages and labour shortage, accompanied by surging inflation. Adeel Halim / Bloomberg

Tirupur’s knitwear exports fell 10% to Rs9,950 crore in the year ended March, from Rs11,000 crore in the previous fiscal year, mainly because of the rupee’s appreciation against the dollar that dented overseas revenue.

Exporters are struggling to attain 5% growth this year, said A. Sakthivel, president of the Tirupur Exporters’ Association, or TEA. That’s despite the rupee’s decline by some 15% this year to the mid-forties against the greenback that should make exports more competitive.

Knitwear units are battling higher costs of fuel and raw materials such as yarn, increased wage bills as inflation surged to a 16-year high and a shortage of skilled labour.

Adding to their woes, the Union government has announced an increase in the minimum support price for medium staple cotton to Rs2,500 a quintal, from Rs1,800-1,850 last year. It has also withdrawn a subsidy of 2% of interest on export credit and slashed duty drawback rates for cotton knitted garments from 11% to 8%. Duty drawbacks enable exporters to obtain a refund of customs duty.

Raja Shanmugham, managing director of Tirupur-based knitwear unit Warsaw International, said the average cost of production has risen by about 24% in the past three months.

Bangladesh, Vietnam and Cambodia, which enjoy duty-free international trade owing to their status as underdeveloped nations, are beating Indian knitwear on price.

Unscheduled power cuts in the state and a recent announcement of scheduled daily six-hour outages have also forced garment manufacturers to invest in captive power generation, pushing up energy costs by at least 250%, Shanmugham said.

Since 1978, when exports began from Tirupur, the town has been a manufacturing centre for leading brands such as Nike, Adidas, Cutter and Buck, Wal-Mart and Van Heusen, among others. The hosiery units here use almost 25% of the 2.6 billion kg of cotton yarn produced in the country.

The textile town, with over 6,000 units engaged in knitting, dyeing, garment manufacturing, printing, embroidery and calendering (a shrinkage-reducing process), employs around 350,000 workers at an average daily wage of between Rs150 and Rs200.

Those wages, though, haven’t stemmed the flow of labour to other industries, be it real estate, which pays between Rs250 and Rs350 a day, or services such as bill collections that are commission-based, said TEA’s Sakthivel.

Workers from the southern Kerala districts of Theni, Kovilpatti and Ramanathapuram typically return to their villages during sowing and harvesting, creating a labour crunch.

Sakthivel estimated that the industry lacks 50,000 labourers at any given time. TEA has tied up with International Leasing and Financial Services Ltd to train young villagers to meet the shortfall, he said.

A shift in focus to artificial fibres using nylon to make sports and swim wear and increasing demand for garments made from organically grown cotton, and introduction of new fabric blends with jute can help the industry, says Sakthivel.

“There is a growing interest in Europe and the US for garments, especially for women and children, made from organically grown cotton," he said.

The production of artificial polyester fibre and polyester filament yarn in India has been rising in the past few years, but a cut in excise duty from 16% to 8% was not fully passed on to the synthetic spinning sector. Scrapping the 5% import duty and 8% central excise are essential to create a level playing field for the synthetic sector in global trade, said K.V. Srinivasan, chairman of the South Indian Mills Association.