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Our Bureau

Ahmedabad , Aug. 11

ARVIND Mills Ltd (AML) has announced plans to shift its existing denim and garments manufacturing facilities from Mauritius to India by December 2004.

This includes an eight million-metre denim manufacturing facility and a two million-piece jeans plant at Mauritius. The total investment in the project is Rs 40 crore.

The cost of transfer of the total plant is estimated at Rs 12 crore, according to a company release here on Wednesday. This includes retrenchment of 510 employees and transfer of assets.

The payback for this expense is expected to be around a year, on account of higher contribution in the Indian operations, particularly in view of the removal of the quota regime.

AML will augment its Indian denim manufacturing capacity to 105 million metres after the relocation.

Similarly, Arvind's Bangalore facility that is currently a 2.1 million jeans plant will be augmented to about four million pieces.

AML set up Arvind Overseas (Mauritius) Ltd by taking over a defunct denim mill, Shape Fabrics, in 1994 and invested on modernising the plant.

Later, Arvind Spinning Ltd and a garment facility were set up in 2003 to vertically integrate the operations.

The rationale behind Arvind's Mauritius investment was to benefit from the removal of the lesser developed countries (LDC) provision from the African Growth And Development Act (AGOA), which enables countries in the African region to make duty-free and quota-free garment exports to the US.

However, this clause does not apply to South Africa and Mauritius, and the garments from these countries need to be from fabric manufactured in the AGOA region.

Though the proclamation of the AGOA Acceleration Act on July 13, 2004, extended the LDC provision for another three years, the returns expected from investments undertaken during the last year are not likely to be adequate.

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