The Hindu Business Line : Slowdown hits Tirupur garment exporters

“The order flow has not stopped but is threatening due to cut-throat competition from countries such as Indonesia, Vietnam, Cambodia and Bangladesh.”

L.N. Revathy

Coimbatore, Dec. 7 Garment exporters in Tirupur seem to be fighting a losing battle. A steep decline in orders coupled with falling margins are supposedly compelling the exporting community to either give in to buyers’ demand or decline order booking.

“It is not easy. The situation looks grim and is deteriorating by the day,” an industry insider preferring anonymity said.

Industry sources were, however, not able to quantify the drop in export volumes. They had in early November admitted to a reversal in trend with exports slipping from Rs 11,000 crore in 2006-07 to Rs 9,950 crore the following year. They had then anticipated a further drop of 10 per cent this fiscal compared to the 2007-08 level.

Now, they are not sure of achieving the targeted Rs 8,950 crore this fiscal.

Alarming situation

“The situation looks alarming. The order flow has not stopped but is threatening due to cut-throat competition from countries such as Indonesia, Vietnam, Cambodia and Bangladesh,” the Managing Partner of Warsaw International, Mr Raja M. Shanmugham, told Business Line.

He said the exporters in this knitwear hub hitherto operated on wafer-thin margin of five to seven per cent. ‘This is being further squeezed. So many units have started to decline order booking or confirm orders selectively. They confirm only if it provides room for sustainability.

“Our primary criterion is sustainability,” he said and pointed out that “players must stay content with turnover by increasing productivity.”

Huge investments

According to Mr Shanmugham, many exporting units in Tirupur invested huge sums on forward and backward integration projects. “Now we have to ensure that these establishments sustain and run. The global meltdown is creating an adverse impact in our business.

“Capacity utilisation levels have dropped due to the steep decline in export volumes. Policy makers should understand our plight and come to our aid.”

Only one shift

Meanwhile, a majority of the units, which had curtailed operations to two shifts since August, have now reduced it further to one shift of 8 hours a day.

Considering the drastic decline in export volumes, would the garment exporters look at the domestic market?

Domestic market

“It is not easy,” Mr A. Sakthivel, President, Tirupur Exporters Association, said. According to him, it would be difficult to break the ice in the domestic market, where brand identity would be critical.

“We execute for big labels on the export front. But here, we will need huge investment for establishing a brand identity. It will not be possible to shift focus all of a sudden,” he said.

Left with no option, the knitwear garment exporters are now exploring opportunities in newer geographies abroad.

“Our contribution is just about 1.5 per cent of the world’s garment exports. Opportunities are aplenty. We need to explore and this can take time. A sustainable policy is the need of the hour,” Mr Shanmugham said.

Exporters are hoping that the proposed stimulus for the textile sector would bail them out at this juncture.

But can this package trigger demand? “We will have to wait and see,” industry sources said.