The Hindu Business Line : Textile sector emerges flavour of the year

It started off with the Finance Ministry announcing a slew of sops for the textile industry - reducing import and excise duties and completing the Cenvat (Central value-added tax) chain.

However, the disorganised sector took exception to the completion of the Cenvat chain and shut shop, leaving most players, big and small, affected for several weeks. Most manufacturers also had to curb supply and wait out the truckers' strike that happened almost simultaneously.

According to Mr Premal Udani, entrepreneur and President of the Clothing Manufacturers' Association of India, overall the year has been good for the textile industry, in particular for the garments sector. However, the segment's main stumbling block has been the rupee strengthening against the dollar. However, exporters are likely to breathe a sigh of relief with the Government announcing plans to work out a package for exporters.

Mr Udani added that with the removal of all tariff barriers in 2005, the country needed a weak rupee to give Indian products an edge over competitors.

He added that indications in the latter part of the year were that the textile sector had become the flavour of the year.

Mr Udani said that with the outbreak of SARS in China in 2003, global players, most with large exposures to China, had realised it was necessary to diversify into many markets. Post-2005 India was likely to reap, indeed was already reaping, many benefits.

The Government needed to adopt a stable currency policy, go ahead with labour reforms and provide the industry support. These would help Indian players hit the global market with a bang.

On the corporate front, a number of companies came into the black and more have had their debts restructured. Reduced interest rates and the TUFS (technology upgradation fund scheme) programme represent an opportunity to thrive. Many companies are using TUFS to fund capacity expansions in readiness for 2005.

This year, the Ministry of Textiles received 1,967 applications to finance projects worth Rs 11,788 crore. Of these, loans worth Rs 5,799 crore were sanctioned and Rs 4,845 crore were disbursed.

Importantly, large textile players have seen the value of their scrips double over the year, the interest mostly spurred by MNC retailers trying to make India an outsourcing base. A number of local players have bagged such orders and sectors export prospects are very positive.

Some sectors such as the synthetic and rayon segment did exceptionally well on the export front. Mr Anil Bamba, Executive Director, Synthetic and Rayon Textiles Promotion Council, said the sector exceeded performance targets by targeting new markets and taking a very proactive role in getting new business.

Though the industry has lately been hampered by the rising price of cotton, because of poor harvests in China and Pakistan, consumption levels are up and most factories are running at optimum levels.

Significantly, while the European Union dropped anti-dumping proceedings against Indian bed linen this year, anti-subsidy proceedings were initiated against cotton bed linen. The EU and US represent the two most important markets for Indian products. This is perhaps an indicator of the kind of protectionism the EU will adopt to protect its domestic industry.