Rathilal Sumaria, 73-year-old owner of a powerloom unit in Bhiwandi, an industrial cluster located at the crossroads of National Highway-848 and Mumbai-Agra highway, is afraid he may have to halt production if polyester yarn prices continue to rise and supplies remain tight. “We are not getting enough yarn. On top of that, we have to do a lot of bargaining (for price),” he told FE. Sumaria is a “master weaver,” a class of small entrepreneurs who have maintained a grip over India’s downstream textile value chain for decades.
Tens of thousands of labourers who operate the looms in the omnipresent small sheds of this ramshackle industrial town get work from people like Sumaria. Over 1.5 million power looms are installed in Bhiwandi, a trading town since the Mughal times. Though the number of units has reduced in recent decades, sizeable sections of the nearly 6,000 operating units are now equipped with modern shuttleless looms, and many also process grey cloth as contract work.
About 200 km away in Surat, Mahendra Ramoliya, director of Sachin Industries Association and a loom unit owner himself, says yarn costs have increased by 25-40% due to the elevated crude oil prices. “I am able to give work to only 40 workers right now, though in normal times, the factory needs nearly 250 people.” The travails of Sumaria and Ramoliya symbolise the ripple effects of the West Asia war and spiralling crude prices on the petrochem value chain where crude is the key building block. While sythetic textiles are in one of the petrochem producton streams, the large and diversified polymers-to-plastic industry is the principal route, serving end users in assorted industries, ranging from white goods, furnitures and autombiles to beverages and tyres.
Polyester Trap
To be sure, the plastic raw material producers have increased prices several times since n March 1. “The price increased by 59% between March 1 and 11.” Private and PSU polymer producers are raising the prices by the same extent irrespective of whether their inputs are gas- or naphtha-based,” All India Plastic Manufactures’ Assoctaion, stated in a letter to the Ministry of Chemicals & Fertilizers recenly. A senior executive from the plastics industry, requesting anonymity, says: “Polymer prices are changing almost daily, which small-scale downstream players are finding hard to absorb. While the industry is used to managing periodic fluctuations, the current volatility is very high and making it increasingly difficult to sustain operations.”
Sunil Jhunjhunwala, MD of Chennai-based TechnoSport, which manufactures activewear, says polyester filament yarn (PFY) prices have already risen 35–40% globally, with the impact expected to reflect on India in the coming weeks. “The total global capacity of polyester fibre is about 90 million tonnes, of which roughly 50 million tonnes is PFY. Around 38 million tonnes of this capacity is in China, which depends heavily on Iranian oil,” he says. Polyester supply chain typically operates on tight inventory levels, which amplifies disruptions. “Even if crude falls to $60 per barrel, prices may not settle immediately due to supply chain issues,” he says.
The impact is spreading to other segments of the textile industry. For instance, manufacturers in India’s knitwear hub, Tiruppur have raised fabric and garment prices by about 7%, citing higher input costs, even though the units are largely cotton-based. According to the industry sources in Tiruppur, the price of polybags have jumped from ₹140 per kg to ₹240 in the last two weeks, while polyester yarn prices have risen from ₹104 per kg to ₹137 per kg. Synthetic rubber prices, too, have increased from ₹235 to ₹280 per kg. Jhunjhunwala’s unit hasn’t resorted to any price hike so far. “Our profitability will be hit for one quarter. If it (war) goes beyond that, we will have no choice but to transfer it to retailers,” he says.
Surat is already witnessing a “slow exdous” of workers hailing from states like Bihar and Uttar Pradesh as most of the city’s 1 million looms are now either shut at operating much below the installed capacity. Sureshbhai Patel, secretary at the South Gujarat Texturising Association, says, “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.” “In the short term, there has been a spike of 15-20% in PSF/PFY/POY prices. Finished textile prices have seen a rise up to 20%. Mmanmade fibre (MMF) based fabric cost is up 50-60%,” says Girdharbhai Mundra of Madhusudan Group.
The crisis extends to the beverages sector, as packaging costs have risen. Nikhil Doda, co-founder and COO, Lahori Zeera, a firm known for fizzy “Indian beverages,” says: “Some price corrections were overdue. Given the current situation, we have advanced this decision and will be implementing selective price increases effective April 1.”
As for manufacturers of plastic pipes, the margins have so far been stable. Firms like Astral, Supreme, and Prince are better placed due to their stronger plumbing/fittings mix, while Finolex and Apollo Pipes are more exposed to PVC price risks given higher their agriculture mix, anaylsys say. Arvind Mehta, chairman of AIMA says: “Smaller producers have shut shop, while others are able to pass on the costs. Orders have shrunk by 30-40%.” Crude oil derivatives account for 70% of the raw materail mix for tyres, and the manufacturers are already feeling the pressure.
Maharashtra’s powerloom industry comprises nearly 0.15 million units with 0.95 millon looms. This is roughly half of India’s overall weaving capacity. Centered around hubs like Bhiwandi and Ichalkaranji, the industry provides direct and indirect employment to nearly 3 million people and produces a substantial portion of India’s gray fabrics.
“Nobody wants to take the grey clothes any longer . How long can we manufacture these products and stock them up,” asks Nimesh Haria, another powerloom owner in Bhiwandi. “Our buyers want us to sell at old rates which is simply not possible.” According to Haria, yarn suppliers now ask for prompt payment and refuse to extend credit. “We cannot run the beyond April 10 if situation doesn’t improve,” Haria warns. Himanshu Mehta, another master weaver concurs: “Nobody wants to buy from us at higher costs. We have to stop (production) soon.” His plant’s capacity utilisation has already fallen by 30%.
Vishwanath Mete, owner of a loom in Ichalkaranji says: “Once units are shut, they can’t be reopened easily Therefore, we have to somehow run them despite all the issues being faced.”
Chandrima Chatterjee, secretary general at Confederation of Indian Textile Industry (CITI), says: “Costs of everything gone up from insurance, freight to packaging materials.” However, since this is not a peak season for the industry, the volumes have not fallen much.
Beyond the Factory Floor
Another fallout of the situation is migrant workers heading home in large numbers from industrial towns due to non-availability of LPG cylinders.
At Suyrat’s Pandesara, a community kitchen facility is helping retain workers. “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,” says Jitubhai Vakharia, President of the Federation of All India Textile Processing Association. The facility was set up under the Pandesara Industries Cooperative Society, where 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, a loom operator says.
Harilal, a worker at Rathilal ‘s powerloom says it has become very difficult to get small gas cylinders to cook. He says the cost of a 5-kg cylinder has risen from Rs 500 to Rs 700 while also being in short supply.