The Hindu Business Line : Processing, weaving, garmenting key growth areas in post-MFA era

THE textile industry is bracing itself to breathe freely in the post-quota regime beginning from January 1, 2005, with the end of the multi-fibre arrangement (MFA) that parcelled out export quotas among developing countries.

Industry sources told Business Line here that the textile industry must perforce upgrade its production chain particularly in the light of the fact that India has emerged as the second largest exporter of textile made-ups, including home textiles such as terry towels, pillowcase, bedspreads, bed linen and curtains. Hence, it is rightly said that processing, weaving and garmenting would be the crucial areas of investments for catapulting the industry on a high growth trajectory.

According to the Northern India Textile Mills Association (NITMA), the high-value readymade garment segment is fully alive to the imperative need to ensure large-sized production units to achieve economies of scale, modernise production method to improve quality and prune costs, ensure ready availability of consistent quality raw material, a drastic paring down of delivery schedule and meet social and ecological obligations that the Western markets warrant.

New investments: Sources said large garment manufacturers have been undertaking hefty investments from their own internal accruals for expanding capacity and upgrading technology and conspicuous in this list include Zodiac, Orient Craft, Madura Garments, Gokuldas group.

Raymonds is expanding denim production capacity by Rs 127 crore, besides investing Rs 40 crore for setting up a plant to manufacture five lakh suits and 10 lakh trousers. An export-oriented unit, Maral Overseas, is setting up a unit in Noida to manufacture ladies and gents knitwear in order to cater to the increasing demand of its traditional buyer, Marks and Spencer. Others in the fray to step up production include companies such as Alok Textiles, Welspun Textiles and Vardhman, which are focusing on their core products by investing between Rs 2,000 crore and Rs 3,000 crore.

NITMA said the companies are on an import binge of technology as the import of second-hand textile machinery has increased due to closure of many textile mills in the US and Europe.

Plan of action on TUFs: Meanwhile, the Textile Minister, Mr Shanker Sinh Vaghela, has expressed his dismay over the slow pace of the Rs 25,000-crore Technology Upgradation Fund Scheme (TUFS) and had directed the Textile Commissioner office, along with nodal agencies and financial institutions and banks, to unveil a plan of action for disbursing Rs 5,000 crore under TUFS this fiscal year itself.

A noteworthy feature is that out of an envisaged investment of the order of Rs 1,40,000 crore in the next five to six years by domestic textile industry, as much as Rs 50,000 crore is set apart for the processing sector as this is construed as the weakest link in the textile chain. A sum of Rs 25,000 crore is being set aside for the weaving sector, to double its capacity to 90 million metres and yarn capacity to 1,035 billion kg by 2010. The remaining Rs 25,000 crore is for the domestic garment sector to triple the production of garments to 15 billion pieces by the end of the decade.

NITMA said the textile and garment industries would get a reprieve until 2008 because Chinese textile and garments would continue under quota until 2008 in terms of an agreement entered into at the time of accession to the WTO.

Competing with China: Again, effective January 1, 2005, China would be off the GSP (Generalised System of Preference which provides access to developed market at concessional rate of duty) list in respect of the enlarged European Union market. This would facilitate Indian exporters to compete more effectively with China in the free market even as China's threat would be in the backburner till its quotas get extinguished outright in a couple of years.It is also stated that many garment exporting units, which had set up satellite units to take as large a share of quota as possible, have begun dismantling these and merging them with the parent company so as to ensure increased capacity to attract big retail chains to source their wares from them.