Surat textile units battle dwindling production in the wake of Gulf crisis

This blow has come at a time when the industry is already grappling with less sales in non-marriage season, workers not returning after Holi and the long holidays due to Eid. And this is further raising concerns over delayed orders, thinning margins, and a deepening slowdown in India’s polyester hub that contributes around 90% of the polyester.

The textile industry, which employs an estimated 20 lakh to 22 lakh workers, has seen it all – plague, floods, Covid, Russia-Ukarine and much more. But the West Asia crisis that is only threatening to intensify has hit the industry where it matters the most – crude oil and raw material shortage, and its increasing prices, which have taken the supply chain for a toss.  

The slow exodus of the workers hailing from states like UP, Bihar and Uttar Pradesh to their respective natives due to non-availability of LPG cylinders is complicating the problem.

Now, the industry is no longer producing nearly six crore metres of cloth every day, which was a benchmark of sorts.

Affect on the ‘Synthetic capital of India’

The industry is only hoping that the crisis ends soon because it is also affecting the cash flow for the unit owners and the industrialists also have to pay hefty EMIs for the upgradation of looms they undertook a couple of years ago. Often referred to as the “Synthetic Capital of India”, Surat is home to 10 lakh looms.

As Sureshbhai Patel, secretary of South Gujarat Texturising Association, explained simply, “Even an increase of one dollar in crude oil prices affects the industry directly. Further, it is also about the holding capacity of the unit holder”. “Those who procured the raw materials at old rate will be able to make profit margins and those who have purchased at higher rates might even have to sell the final product at a loss or hold it for some time,” he added.

“In short term there has been a spike of 15% to 20% on PSF/PFY/POY (MMF yarn) prices. Finished textile prices have seen a rise up to 20% and in MMF based fabric the yarn cost is about 50% to 60%,” Girdharbhai Mundra of Madhusudan Group, a leading textile group, told FE.

The resultant effect is on the capacity utilisation. According to Mundra, “In some units there has been a production cut up to 50%. The freight cost has gone up to 400% and export markets in the Middle East and Africa have been disrupted.”

He further pointed out that the synthetic industry has been hit first and now the cotton industry too has started feeling the heat. However, it is too early to estimate the losses in both the sectors, he said.

These are crude oil price rise linked price escalations in MMF raw materials and the only way the margins that are under pressure can ease if and when the prices go down.

Mahendra Ramoliya, director of Sachin Industries Association, told FE that yarn costs have increased by 25% to 40% due to rising crude oil prices. Since crude oil is sourced from Gulf countries, shipping costs have also gone up due to heightened risk. Due to multiple factors, his own weaving unit is left with only 42 workers out of a total of 250.

He feared that if the war does not end soon then even the local sales will be affected for Surat generally exports only little over 10% of the synthetic products.

Displacement of migrant workers

Even as the industry grapples with the effects of the West Asia crisis, migrant workers heading home due to non-availability of LPG cylinders is only adding to the problem.

However, a community kitchen started in Pandesara a year ago is helping to restrain workers from going home.

“We began a year ago by serving 200 workers. The number gradually increased to 2,000. Now, with the West Asia crisis, it has risen to 5,000 and continues to grow. The figures also include tiffins sent to units,” said Jitubhai Vakharia, president of the Federation of All India Textile Processing Association. The facility was set up under the Pandesara Industries Cooperative Society Limited. An unlimited full meal is available for Rs 45, while a packed lunch costs Rs 50.

Most workers live in cramped conditions, often with five people sharing small rooms. They depend on commercial LPG cylinders of 22 kg, from which smaller gas stoves are refilled. What earlier cost around Rs 100 per kg has now risen sharply to Rs 500–600 per kg, an industrialist said.

“These workers have made Surat their home. Some live with families, while others stay alone,” said Mahendra Kajiwala, former president of Southern Gujarat Chamber of Commerce and Industry.