By Ravi Kishore Panuganty
In its early years the Indian garment industry took shape mainly due to the demand of expats in the UK and other countries for traditional Punjabi suits. Recognising the export potential, the Government offered attractive incentives. The result was a thriving business in garment exports with small units mushrooming in different parts of the country close to slums and other semi urban settlements, especially in Delhi, Mumbai, Chennai and Bengaluru.
From such humble beginnings, apparel making advanced into large garment industry giving direct employment to millions of people. It also provides employment to support industries like textiles, processing, trims, and many more value addition services.
The tiny industry grew in space and capacities with investments in modern machines, large assembly lines with conveyor systems, machines with precision sewing capabilities. It uses management and planning software like FastReact, Gerber and Tukatech for designing, pattern drafting, and cutting.
The industry specialised in products like fashion wear, technical garments, sportswear and medical clothing etc. Fabrics made of cotton, silk, linen, wool, viscose, banana, bamboo, modal, tencel, polyester, nylon with a variety of finishes are used. Today India is a reliable trading partner of leading retail giants like GAP, ESPRIT, and JC Penney. It exports to Europe, USA, Canada, Japan and South American countries with a market share of 5% and a value of US $ 16.29 billion in 2018-19.
Human Capital and Location: The Critical Correlation
Despite the exponential growth over the years, the industry continues to rely on human capital as the main resource. Almost the entire industry works on CMT (cut-make-trim). It operates on high productivity to realise profitability and to achieve this goal, the industry invests considerable time and money in training its operators. Thus, the operator behind the machine is a vital resource.
It is for this reason that the industry stayed close to locations high in manpower, specifically close to slums and other semi-urban settlements. New units and start-ups operate closer to the workforce. A reason for selection of such localities is cost of transport, low rentals and scale of operations. But over the years it moved to industrial areas requiring employees to travel from distant locations.
The Story of Apparel Parks
Government of India launched the Scheme for Integrated Textile Parks (SITPs) in 2005 to provide infrastructural facilities to promote industrial clusters that comply with environmental and social concerns of global business. The SITPs are planned to offer seamless value addition from yarn to garment. As per the 2016 report with the Ministry of Textiles, 74 SITPs are sanctioned, but only 30 are functioning.
Some parks are fully integrated like Jaipur Integrated Texcraft Park Pvt. Ltd., Lotus Integrated Texpark Limited, Ludhiana Integrated Textile Park Ltd., MAS Fabric Park (India) Pvt. Ltd., Pochampally Handloom Park Ltd. Others like Brandix India Apparel City are developed by single investors, while many are developed by the Government. Certain parks specialise in textiles while some produce both textiles and garments. Most parks have both domestic and export units.
Apparel Export Park at Gundlapochampally, Hyderabad and Doddaballapur Apparel Park, Bangalore were established two decades ago to develop the apparel industry and exports.
These parks are developed in areas over 170 acres each. But today they wear a deserted look. Barring a few units, many are either closed or rented out for warehousing and other activities as in Hyderabad Park. Similarly, the Bangalore Park has few units in operation.
Reasons for Failure
The parks are located outside the cities and towns. Their location impacts adversely their sustainability since women are the major workforce and the industry finds it difficult to mobilise them due to the long distances.
In addition, poor connectivity is a reason for their failure. Lack of public transport and poor roads are a drawback. Investors shy away as no ancillary units and services are available. Some parks are not connected to national highways or rail heads and sea ports hindering movement of raw materials and finished goods. Export units prefer inland container depots nearby to save time.
It is also said that land cost inside the parks is higher than outside. Although certain infrastructure is developed by the park authorities, many MSMEs feel that the pricing of the industrial plots is higher and not justified.
Moreover, the small areas of the parks, is another reason for their failure. Internationally such parks are spread over 150 acres and more, in India only 5 sanctioned and approved parks are of this size. Majority of them are less than 75 acres.
Apparel and textile parks in Ethiopia, Italy, Kenya, Indonesia, Vietnam and Sri Lanka are larger in comparison.
Although the scheme suggests integrated parks, many are, however, dedicated to a single element in the value chain like weaving or garmenting. Thus most of the parks have failed to establish a complete value chain from fibre to garments like weaving, processing, finishing and garmenting.
Furthermore, the SITP implementation is plagued by financial problems. Parks are built on a Public-Private-Participation model, with central and state governments funding Special Purpose Vehicle (SPV) to develop infrastructure. Planned common facilities like effluent treatment plants, living quarters, hospitals, restaurants and hotels are either not implemented or maintained. Industrial units built in the parks do not operate as the facilities are incomplete. Often, development outside the parks is the responsibility of state governments and is neglected.
Finally, parks are not marketed professionally. Both state and central governments do not consider marketing as an important factor for their promotion. If the parks are to succeed, the agencies must reach out to international buyers and brands like JC Penney, GAP, Esprit, Nike, ZARA, H&M etc., apart from domestic manufacturers.
Above all, the industry works on sharp CMTs. Given the challenges highlighted it finds operations in the parks not financially viable. The state and central governments must revisit the scheme and offer incentives to sustain the industry and make them viable.
(The author – Ravi Kishore has an experience of over four decades in the Indian Apparel Industry. He worked in various capacities Indian Apparel Industry in export promotion, marketing and management, teaching and skill development. He can be reached at firstname.lastname@example.org or email@example.com. Views expressed are personal and do not reflect the official position or policy of the Financial Express Online.)