Rs 20,000-cr industry turns around in first three months of 2013, after 3 years of negative growth; labour, power issues persist
After reporting a decline for three years, the Rs 20,000-crore textile industry at Tirupur, knitwear hub of India, has reported a growth in exports during the first three months of 2013.
Iry has attributed the growth to new markets, explored in the past 10-12 months. Meanwhile, labour and power shortages are going to be major obstacles, say industry representatives.
Exporters from this town, about 450 km from Chennai, said the Free Trade Agreement (FTA) expected to be signed anytime with the European Union, would help them compete with Bangladesh, which is now enjoying duty-free benefits.
A Sakthivel, president, Tirupur Exporters Association, said: “We started seeing some sign of relief from January, from old and new customers (mainly from the non-traditional markets).”
Exports fell 10-15 per cent in 2009-10 and 2010-11; in 2011-12, it was flat, thanks to the rupee’s appreciation against the dollar. In 2006-07, when the industry clocked around Rs 11,000 crore, it had set a target to reach $4 billion (Rs 21,800 crore) by 2012. However, it could reach only $2.75 bn (Rs 15,000 crore).
The general global downturn, rupee appreciation, increase in costs (power, transportation, yarn, logistics, diesel) and the high court’s decision to close dyeing units had hit the industry badly after 2008.
“We are seeing some sign of relief now. Between January and March, we have seen five per cent growth, though margins continue to be under pressure,” said Sakthivel.
Industry representatives have said the growth was mainly due to contribution from new markets into which it had ventured in the past one or two years. These include Japan, South Africa, Israel and South America. It also saw some relief in the US markets, along with new orders.
“The concern is the European market, which used to contribute around 50 per cent to the industry,” said Sakthivel.
With the new order flows and opening of new markets, exports from Tirupur are expected to touch Rs 14,000 crore in 2013-14. While the order inflow is good news, exporters are struggling to convert these enquiries to orders.
A leading exporter said lack of power and shortage of labour hurts the industry.
“The power cut ranges from seven to eight hours during the day. In the night, every two hours, power goes for one hour,” he said. “Average delay (job orders) in delivery ranges from 10-15 days. An airlift to meet customers requirements means additional cost.”
The recent increase in diesel prices is also hitting the industry, said Sakthivel. “Our FOB value has increased by two per cent because of the increase.”
Exporters have asked the government for a ‘gold card’ scheme, to enable them to buy diesel at the international price from a designated oil marketing company. And, to allow duty credit scrip at five per cent of garment exports for the performance in 2012-13, for issuance of scrip from 2013-14. The scrip will be used for offsetting customs duties on speciality fabrics.
The Association estimates 50,000-75,000 more workers are required immediately to meet the new demand. The industry had lost a lot of workers after the downtrend, which had resulted in closure of many units.
source: http://www.business-standard.com / Home> Companies> News> News / by T E Narasimhan / Chennai, March 28th, 2013