The Cotton Textiles Export Promotion Council (Texprocil) has recently released a report titled ?Benchmarking Study of Production Costs in India vis-?-vis Bangladesh, China, Egypt, Indonesia, Pakistan and Turkey?. Apart from a detailed analysis of the impact of various cost factors like wages, power, water charges, transport and exchange rates on the competitiveness of textiles in India and the other competing countries, the study also outlines the support given by these countries to promote textiles exports. It is clear from this report that even at R53 to a dollar, India is the most competitive nation in the world of cotton yarn. Texprocil chairman and a textile industry veteran, Manikam Ramaswami, believes that the Indian textile industry has attained global competitiveness. He discusses with Sushila Ravindranath the implication of the report?s findings and why in spite of being competitive, the industry margins remain low.
How competitive is the Indian textile industry as compared to the other major players?
The industry operates under extremely low overheads, which are a tiny fraction of the overheads of comparable companies in any other industry. Our operating machine speed in spinning and weaving is 30% higher compared to China?s. Most Indian mills follow ?lean manufacturing?, even if they are not familiar with the concept. They have been adopting evolved labour involvement techniques like Quality Circles and Kaizen. Some of the QC groups have members who do not speak any common language. Surprisingly, power, labour and equipment are the key factors that have made the Indian textile industry intrinsically competitive.
Hasn?t power shortage across India, especially in the South which accounts for a considerable portion of the spinning sector, been a major problem?
We have been constantly working on reducing specific energy consumption although we have gone in for a higher level of automation and mechanisation. The exporting mills of power-starved South get 50% of their power needs from their own windmills, generating a total of almost 3,000 MW. Many textile mills have laid dedicated lines to get the power they produce through windmills and the power they purchase, spending several crores of rupees. The decentralised sector is also getting its act together. It has learnt to optimise production by increasing the capacity of low-cost machines and running as much of the facility possible only during nights and those infrequent power-available moments.
Our labour productivity is said to be quite low?
As far as labour is concerned, a false impression has been created that our labour productivity is lower than Bangladesh’s. Our workers are actually as good as the best. Almost all exporting companies across sectors have in-house training facilities capable of converting unskilled and uneducated workers into world-class operatives who can operate highly sophisticated, state-of-the-art machines, that too within three months. Textile shop-floors have workers from different parts of the country speaking different languages. Mills have learnt the culture, food habits and festivals of various workers and have fine-tuned their HR practices to accommodate everybody?s requirements.
What about equipment?
Our industry was pretty outdated till late-1990s. Now, it has rapidly transformed itself into a very modern one with a fair degree of automation and mechanisation because of the Technology Upgradation Fund Scheme (TUFS). Many international machinery manufacturers have set up shop in India and are offering world-class machines at Indian prices to the spinning sector. However, this has not happened in weaving and knitting and home textile manufacturing. We fall behind in processing as well. Our competing countries with lower costs also suffer from similar disadvantages but to a much larger extent than us.
Why has then the industry suffered from near-zero profits in the last 15 years?
There are several factors that have severely impacted the profitability of our industry. The marketing policy of the support price operator Cotton Corporation of India (CCI) giving huge discounts to cotton exporters and the Vishesh Krishi and Gram Udyog Yojana (VKGUY) giving retrospective incentives to cotton exports ended up putting our cotton at 10% lower prices in the hands of our competitors. More recently, holding back cotton sales and creating an artificial scarcity helped traders increase cotton prices well over international prices. This, in turn, affected our export competitiveness and made mills lose money. The higher than necessary Duty Entitlement Pass Book (DEPB) given to yarn exports impacted the competitiveness of the value-added sectors. The powers that be have not understood that it is relative prices that affect competitiveness. The efforts to control absolute prices and quantity of exports without taking into account existing data have caused a huge loss to the textile industry. Some of the decisions taken have defied logic.
It is extremely important to have a transparent, clearly-spelt-out policy to market the cotton procured by CCI. It should also be kept in mind that a cotton surplus country should, at any given point of time, have a lower cotton price in the domestic market than international prices. Cotton Yarn Advisory Board (CYAB) that aims to control absolute prices and restricts exports must be dismantled.
Texprocil is involved in export promotion across different sectors of the industry. We have advocated the modular drawback scheme, which has been accepted by the drawback committee. This will encourage value creation and deny competing countries any advantage of sourcing of raw materials and intermediary textile products at lower prices. This alone is enough to protect the relative competitiveness across various sectors. We can then inspire confidence among investors and lenders to put in another lakh crore rupees into the textile industry. This will create a huge opportunity to add another $50 billion in exports and create some 10 million new jobs.
You say textile industry can be a vehicle to provide inclusive growth. What do you mean by this?
Wages have shot up in the farm sector post the MGNREGA which has led to increasing mechanisation. This will create joblessness in rural areas. Textile industry can provide jobs to erstwhile farmhands in tier-3 and tier-4 towns and villages. To do that the textile industry has to grow rapidly. We can train millions of unskilled, uneducated and even malnourished youth from any part of India and give them jobs.