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Special package to benefit textiles value chain – SIMA
06
Apr '10
Due to high input and labour costs, the spinning and garment sectors of the textile industry are facing a unique crisis. Both spinners and knitters are playing a blame game, wherein the knitwear units in Tirupur, blame the spinning mills for increasing yarn prices. More so, they also doubt operations of a cartel. Another reason, according to knitwear units for price rise, is the increase in the exports of yarn.

On the flip side, spinners are pleading about their problems such as, the increasing cotton prices, longer power cuts and rising power and labour costs. Although their association, Southern India Mills Association (SIMA), cannot interfere with the commercial activities of the mills, it is implausible that over 3,300 mills across the country act in unity, said a SIMA official.

As per SIMA, Tirupur units can increase their competitiveness by modernising production process, increasing labour productivity and reducing environment cost, on its own.

According to SIMA Chairman, J Thulasidharan, “Starting with the spinning sector, conjoint efforts and special packages would benefit the complete textiles value chain. Regulating cotton exports during peak season and making the industry take advantage of home grown cotton; provide working capital assistance to spinners to source adequate quantity and quality of cotton during season; have a level-playing field with multinational cotton traders and supply uninterrupted power to the textile industry at global rates (exempting the industry from power cuts and peak hours restriction), are few steps that should be looked into.”

In addition, measures such as, working capital assistance to the garment sector to facilitate them to get smooth supply of yarn and maintain optimum inventory; benchmarking the garment sector with Bangladesh or Sri Lanka to improve labour productivity and reducing production cost and making available necessary assistance to reduce cost of dying and effluent treatment, were recommended by him.

Since the economic meltdown in 2008-09, all investments and modernisation in the textile industry came to a halt and no new capacity was created. Factors amounting for 80 percent of production cost in the spinning sector are high capital, power and labour, said, Thulasidharan.

The sector is operating at a lower profit margin of 4 to 6 percent of the sales revenue and the investment to revenue ratio is less than 1. Most often, the power cost is 8 percent on sales revenue in AP and 12 percent in TN. However, now due to higher power tariff and private power purchase, the power cost is 18 percent on sales revenue.

Coming to the rising labour cost, Thulasidharan stated that, “During 2009, the daily wages in Tamil Nadu, were ranging from Rs 130 to 150. But currently, it is now between Rs 230 and 260. In addition to the labour cost, is the rising cotton price, which is a global phenomenon, cost of clean cotton per kg of yarn has increased by almost Rs 21.”

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