The Hindu Business Line : `Capacity consolidation in textiles not happening'

ONE of the challenges for the domestic textile sector in tapping new business opportunity in a quota-free textile trade next year is scaling up capacity and the possible way of achieving this is through consolidation of capacities through take-overs.

But it is not happening right now and there is no sign of this to occur in the near future either, according to Mr Vijay Venkataswamy, Chairman of the Southern India Mills Association (SIMA).

Speaking at the 29th technological conference of the textile research body South India Textile Research Association (SITRA) here, the SIMA chief felt that the primary impediment to this was the outdated labour laws.

Even as the financially strong unit was willing to take over the capacity of the weak textile unit, the former would not like to take over the labour baggage.

This apart, the financial institutions were also not willing to back up textile takeovers that may call for huge investments due to the low return on capital employed for the industry.

Another hurdle in raising the capacity is that there are not enough capacities available in weaving and processing sectors.

While weaving and garmenting sectors were recently de-reserved, the knitting sector continues to be reserved for the SSI and the industry and the Government needed to find a solution to this aspect.

Stating that moving up the value-chain in textile production and efficient supply-chain management would emerge the decisive marketing tools, Mr Vijay Venkataswamy also called for shift in textile management structure to face the new challenges.

Most of the textile units remained under the family-controlled management and there is a case for the ownership to be divested towards professionalism so as to make it distinct from management control.

"We have seen this trend taking roots in other industries but textiles being an industry having presence in both the organised as well as the unorganised sectors.

Divestment of ownership from management will not only bring in a greater transparency in governance but also lead to better ethics in the industry," he said.