Tirupur is the seventh largest city in Tamil Nadu and is one of the fastest developing cities in the state. Popularly referred to as "Dollar City" or "Small Japan" or Banian City" it excels in knitted ready-made garments. Yet, at first glance, nothing about Tirupur can make one believe that this town earns and annual $1200 million plus in foreign exchange. This is because the state government and local municipal authorities have been too slow to cope with this dynamic growth.
The main problems and difficulties faced by the Tirupur
Garment industry relate to raw material availability, pricing, subsidiary and
ancillary industries like processing units, labour, taxation and other
Raw material availability
Raw material availability is a vital area for any industry,
whereas uncertainty is prevailing in India with respect to the major raw
materials, namely, cotton and yarn, etc.., the undue and frequent price fluctuations, the mismatch between supply and demand, lack of proper forecasting of
political decisions and other commitments.
Compared to other countries the production costs are much higher in Tirupur, and the Tirupur exporters find it difficult to compete with other countries. For example, in Bangladesh they are able to quote prices that are lower by 17 percent, thus securing very good export orders. In Tirupur, the knitting, processing and finishing units are scattered all over, whereas other countries are run under one-roof.
Compared to other countries, the higher fuel cost in India mainly Tirupur is a major draw back. The duties and taxes on petroleum products are also higher in India especially in Tirupur.
Processing units are located at different places; lately discharge of effluents has proved another problem. The government is well aware of the situation that existed for over four decades, and all of a sudden industrial units were put under pressure. While the units are tiny in nature they are asked to have effluent treatment plants.
Unlike other countries labour has become a very sensitive area to handle in Tirupur. Skilled labour in the basic, requirement. Some big industries spend huge time and money on training, but unfortunately there is no assurance or binding on the part of trained labour to continue to work in one place.
Taxation and other laws
The bureaucracy in India, particularly the customs and excise, income tax, foreign trade, etc.., is in general not happy with any business community, particularly exporters. The rules and regulations and policies of one ministry are contradictory to those of another. Different interpretations are made and objections raised. Show case notices are issued by the officials, and the entrepreneurs are put to a lot of difficulties.
To remedy the overall situation, the following suggestions may be accepted.
- Clear-cut policies on raw materials, in the interest of indigenous industries, should be planned, chalked out and discussed well in advance. Prohibiting/banning the export of raw material is to be invariably considered in detail and enforced.
- The government should concentrate on removing the capacity constraints on infrastructure. All-out efforts must be made to encourage vertical set-ups required for the industry.
- The export benefits and incentives for exporters must be such as to enable them to compete with a lower price and are at least at par with their counterparts in other countries.
- The government should Endeavour to end the burning problems of the processing units on a war footing.
- With regard to labour, an atmosphere may be created for the employer to feel comfortable and secure in order to serve the nation by running his industry smoothly and successfully.
- A friendly tax policy is most essential. Besides, a lowering of effective tax rates, the government officials may be asked to desist from raising unwanted litigations.
- The quota restrictions in china are going to be lifted by 2008. By that time most of the buyers may prefer doing business with china for obvious reasons rather than with India. It is time that Tirupur/Indian exporters started equipping themselves to face the challenges.
About the Author:
S. Venkatachalam is a student of MBA, ICFAI National College, Tirupur.
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