India pips China, others in cost competitiveness in spinning

Written by fe Bureau | New Delhi | Updated: Jul 26 2013, 18:02pm hrs
India has pipped China and other major textile suppliers in competitiveness in the capital-intensive spinning segment, a latest study said, further bolstering the notion that enhancing the share of the organised sector in textile manufacturing results in lower costs. However, senior industry executives said systemic obstacles in the form of archic labour laws, frequent power outages and other infrastructural bottlenecks outweigh the inherent cost competitiveness and prevents growth in the countrys share in the global trade, senior industry executives said.

Based on an assumption that Indias manufacturing cost in the spinning sector was 100 in 2012, Chinas was high as 138, followed by Indonesia (110), Bangladesh (104) and Pakistan (101), according to the study commissioned by the state-run Textiles Export promotion Council (TEXPROCIL). However, in the weaving and processing sector, the manufacturing cost of China stands at 111, followed by Pakistan (110), Bangladesh (87) and Indonesia (99), compared with Indias 100.

This reflects the growing urgency of bringing in more players into the ornaised sector in the weaving and processing segmant through policy intervention, the executives said. Importantly, the share of unorganised manufacturing in the yarn segment, a major beneficiary of the governments technology upgradation fund schme (TUFS) since the latters inception, is barely 10%, compared with 80% for garments and roughly 90% for fabrics.

In 2011, 40% of ring spinning machines installed by the textile industry were less than 10 years old, compared with 29% in 2006 and 26% in 2002. Similarly, the industry achieved 100% shuttle-less weaving capacity with less than 10-year-old machines, compared with 75% in 2002.

Moreover, the report says a weak rupee has driven up Indias cost competitiveness in the export market in recent years, compared with China. Although the rupee appreciated by 5.5% during 2002-2006, it weakened by 24% between 2006 and 2012 (24 per cent), while Chinese currency appreciated against the dollar by 23.8% in the decade through 2012.

However, the report said India has to go a long way in catching up with China in the textile sector, which captured more than 35% share in global trade in 2011. In absolute terms, while Chinas textile and garment exports hit $248 billion in 2011, India remains a distant second at $ 29.4 billion.

Our share in the global trade suffers because of a lack of an effective overall policy framework, which has resulted in periodic restrictions on the shipments of certain raw materials. This has prevented investors to put in their money. Moreover, labour laws and some other infrastrutral obstacles are also to be blamed. So while cost cometitiveness is there, we need an enabling policy environment along with infrastructural support to gain from the inherent cost cometitiness to realise the potential, said DK Nair, the secretary-general of the Confederation Of Indian Textile Industry.

Industry executives said although the study has factored in the cost of grid power, a lack of adequate availability of electricity, especially in Tamil Nadu and Andhra Pradesh, has forced textile units to seek supplies from alternative sources at a much higher cost. So the cost-competitiveness in power may not accurate, they argued. Moreover, they said although manufacturing costs in China have gone up in recent years, huge subsidies and quality infrastructure there have offset these negatives compared with India.

Textile minister KS Rao said on Thursday the government is planning to increase the interest subvention for powerlooms to 6% from the current 5% under the TUFS. He said he would also request Prime Minister Manmohan Singh to be able to use the MGNREGA for the benefit of the textile sector, which will needs a tweaking of the current guidelines.

Thanks to organised manufacturing, spinners have traditionally accounted for around a half of the total committed investments under the TUFS and grabs 50% of the governments subsidy allocation. The government has catalysed investements worth R111,000 crore in the textile sector in the three years through 2011-12 by offering a subsidy of R9,000 crore under TUFS and expects to attract investments worth R151,000 crore during the current Plan period, with a subsidy allocation of R11,952 crore.

The government mainly provides interest subsidy against loans to units, capital subsidy and limited cushion against exchange rate fluctuation for investing in new technology.