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Anil Sasi

New Delhi , Oct. 2

IT has been advantage China and a struggle for India in the post-quota global textile markets, thanks primarily to the better pricing leverage of the large-sized Chinese firms.

The smaller and highly fragmented Indian textile companies, in sharp contrast, have failed to make a major dent in the price-sensitive, high-volume textile segments of the US and the EU, losing out market share to Chinese suppliers. Ten months into the quota-free regime, Indian suppliers are finding themselves restricted largely to the niche products' markets, which are comparatively less price sensitive, according to industry players.

A size comparison of the largest Chinese and Indian textile firms brings out the striking contrast in their scale of operations and the resultant pricing advantage enjoyed by the Chinese. In spinning, for instance, India's largest firm has a capacity of half-a-million spindles while the largest Chinese spinner is executing a capacity of nearly 3 million spindles. In the garmenting sector, India's two largest exporters are around $100-125 million in size, while a host of Chinese firms are between $500 and $800 million in size, according to KSA Technopak data.

Besides the size-related pricing disadvantage, Indian firms also operate through a large number of factories, resulting in loss of operational efficiency. For instance, India's largest apparel exporter Gokuldas Images operates a total of 41 factories. In contrast, Luen Thai Holdings, the largest apparel firm listed on the Hong Kong Stock Exchange and roughly about four times Gokuldas' size, is consolidating almost its entire manufacturing to two mammoth factories in Dongguan, southern China. The company, which earlier had operations spread across four countries, is in the process of building a two-million foot industrial campus that includes a factory, dormitories for 4,000 workers, and a 300-room hotel.

"The Chinese strategy of building huge textile factories with international scale of operations has clearly resulted in better pricing leverage in the cut-throat post-quota global textile market. The pricing advantage, resulting out of operational efficiencies of large factories, has enabled Chinese exporters to corner a big chunk of the mass textiles market in the US and the EU," Mr D.K. Nair, Secretary-General, Confederation of Indian Textile Industry, said. According to industry players, the Government policy of disallowing tax advantages to units that are above a certain size has largely led Indian firms to open a large number of small units, resulting in a lower operational efficiency in the post-quota regime.

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