The Hindu Business Line : It's back home for textile exporters as quotas go

IT'S a homecoming of sorts for several Indian textile exporters. With the quota regime in global textile and clothing trade set to be phased out in three months, a number of textile exporters who had set up base in countries such as Nepal, Bangladesh, the Middle East and African countries to tide over quota shortages in India are now relocating back to the country.

Those planning to come back include larger players such as Arvind Mills, which is shifting its existing denim and garment manufacturing facilities from Mauritius to India by this December. According to industry sources, a slew of small and medium Indian export companies, which have been operating from Nepal, Bangladesh and Sri Lanka, are coming to India since the utility of opening these units for bagging quotas available to these countries would be over once the quotas are phased out.

While some of the bigger firms such as Chennai-based Ambattur Clothing Ltd, which has units in Bahrain in the Middle East, has adopted a wait-and-watch policy to ascertain if the pending Middle East Asia-US preferential duty agreement is finalised, others have already started packing their bags, industry players said. "Most of the players have started coming back since the cost of operations in these countries is about 20-25 higher compared to India. Since the advantage of locating their manufacturing base in these countries would be lost once quotas are phased out, they find it more competitive relocating to India," an industry player said.

The Indo Rama Synthetics' Managing Director, Mr O.P. Lohia, had told Business Line earlier: "The main advantage for textile exporters in India, as also in the case of China, is that the entire raw material base is present domestically. In contrast, in Sri Lanka, Bangladesh and many of the other countries, manufacturers require to source raw material from other places since the countries are not self-sufficient in the raw material base."

Also, the manufacturing cost advantage in India is a big draw for not just Indian exporters' units operating from abroad but also foreign players planning to set up low-cost manufacturing bases, an Indian Cotton Mills Federation (ICMF) official said. "The trend towards these players moving their overseas operations back to India is quite discerning and will intensify once the January 1, 2005, deadline comes closer," the ICMF official said.

According to the industry players, Nepal has sought an extension of the quota regime for a few more years before the WTO, largely due to the exodus of textile manufacturing units from the country to India. Sri Lanka, on its part, is also trying to patch up a trade pact with the US to remain competitive as a manufacturing hub once the quotas are phased out.

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It's back home for textile exporters as quotas go