Weaving Success
While European textiles and clothing companies have been crucial in providing short-term relief in the crisis, such as converting their production or an increased production of PPE, now long-term goals need to be tackled that involve a renewal process of the sector and its value chain and a more competitive and greener future.
India’s textile industry is in a crisis and needs urgent fixing. Widely regarded as the second-highest employment generator after agriculture, the sector employs around 45 million workers directly and another 60 million indirectly across the country. Outbreak of COVID-19 is causing significant economic turmoil across economies around the world. Across the globe, shops are closed; brands and retailers have an oversupply situation with whatever orders they have placed.
US-based retail giant Macy’s has announced that it would furlough most of its 1,30,000 employees while others such as Burberry have forecasted a staggering 70 to 80 per cent drop in sales. The UK-based retailer Primark has announced a cancellation of all new orders and Inditex (the owner of clothing brand Zara) has already written off some $336 million worth of inventory. In India, the situation is even worse. Many global buyers are expected to file for bankruptcy or go into liquidation, which would leave textile manufacturers including those in India with crippling levels of bad debt.
Given the current scenario, many Indian industry players have shelved expansion plans indefinitely and have in some extreme instances even been asking customers for contributions to their salary fund. Evidence of the stress in the industry is apparent when most players have started announcing pay cuts to middle and senior management and scaling back of production capacities.
India’s man-made fibre (MMF) textile segment is one of the worst-hit in this epidemic. There have been huge losses incurred and a shortage of funds due to the cancellation and deferred orders and that put the industry under ventilators.
US-based retail giant Macy’s has announced that it would furlough most of its 1,30,000 employees while others such as Burberry have forecasted a staggering 70 to 80 per cent drop in sales. The UK-based retailer Primark has announced a cancellation of all new orders and Inditex (the owner of clothing brand Zara) has already written off some $336 million worth of inventory. In India, the situation is even worse. Many global buyers are expected to file for bankruptcy or go into liquidation, which would leave textile manufacturers including those in India with crippling levels of bad debt.
Given the current scenario, many Indian industry players have shelved expansion plans indefinitely and have in some extreme instances even been asking customers for contributions to their salary fund. Evidence of the stress in the industry is apparent when most players have started announcing pay cuts to middle and senior management and scaling back of production capacities.
India’s man-made fibre (MMF) textile segment is one of the worst-hit in this epidemic. There have been huge losses incurred and a shortage of funds due to the cancellation and deferred orders and that put the industry under ventilators.
Ronak Rughani, Chairman, the Synthetic and Rayon Textiles Export Promotion Council (SRTEPC), said that the association has been taking up the issues and difficulties being faced by the exporters of the MMF textiles segment at various platforms.
Some of the measures requested by the SRTEPC to the government are: announce a special corona-relief package for the textile industry including the entire value chain of the MMF textile segment to tide over the prevailing coronavirus crisis. Special export incentive of three per cent on fibre and yarn, four per cent on fabric, and five per cent on made-ups for at least six months or till the impact of coronavirus subsides and global markets stabilise.
Other recommendations by SRTEPC included: a separate package for the MMF textiles segment as this segment has been reeling under inverted duty structure under GST, include entire MMF textile value chain viz., fibres, yarns, fabrics, made-ups, etc. under RoSCTL and MEIS benefits, the entire MMF textile value chain is needed to be covered under the RoDTEP scheme, and extend one-year moratorium with immediate effect till March 31, 2021, for repayment of principal and interest amounts to the banks and NBFCs.
Rughani said that the MMF textiles segment has already been going through Inverted Duty Structure due to which huge amount of ITC has been accumulated which are neither refunded nor utilisable. Therefore, Rughani categorically mentioned that a separate package for MMF textiles segment. Further, giving emphasis on introduction of special incentives by the Government Rughani, mentioned that unemployment is a serious concern in the textile industry including the MMF textile segment for which the above–mentioned policy initiatives are extremely important for resuming production bringing stability to the MMF textile segment after the havoc created by the COVID-19 epidemic.
Getting back on track
The Government of India has launched the following initiatives to strengthen textile production and encourage this industry to cater to the domestic and international markets efficiently:
Scheme for integrated textile parks (SITP): The Scheme for Integrated Textile Parks (SITP) is at the centre of developing a sustainable infrastructure for the textile sector. Under SITP scheme, the government will provide funding for infrastructure, buildings for common facilities like design & training centre, warehouse, factories and plant and machinery. Till now, 74 textiles parks have been approved and are at various stages of implementation with 18 parks operational, 32 under implementation. The investment of $692 million is sanctioned by the government which will create 66,000 jobs.
Integrated processing development scheme (IPDS): IPDS is being implemented to make Indian textiles more competitive and environment-friendly. The government will assist the existing textile processing units to follow relevant environmental standards using latest technology. The process parks created for this purpose will deal with waste water management and promote the use of cleaner technology in the processing sector.
Integrated skill development scheme (ISDS): Textile weavers and workers lack formal training in using latest technology which reduces their chance to get a better job and higher wages. ISDS plans to bridge that skill gap by training 1.5 million people. An amount of $300 million has been allocated for training by the government for the same purpose. The primary objectives of the program are to standardise courses, increase industry involvement and to set robust monitoring systems in vocational training of the textile sector.
Amended technology upgradation fund scheme for textiles industry (ATUFS): The old machinery and technologies used in the textile industry can affect productivity and safety. ATUFS is designed to provide incentives to entrepreneurs and business owners for upgrading technologies. A one-time capital subsidy will be offered to business owners from technical textiles, garments, and weaving. The Central Government will provide 15 per cent subsidy to the garment, apparel and technical textile sectors. This is subject to the ceiling of $4.62 million on upgradation.
Merchandise exports from India scheme (MEIS): MEIS is aimed at stimulating the growth of textiles exports from India in various traditional and emerging markets. The scheme has been finalised after consulting various stakeholders. The market coverage of MEIS scheme has been extended. About $3.2 billion has been sanctioned by the government for the MEIS. According to the Ministry of Textiles, the textile sector is one of the biggest beneficiaries the MEIS.
Technology mission for technical textiles (TMTT): TMMT has two mini missions to create a healthy ecosystem for the production of technical textiles in India. The scheme launched in 2011 for the period of five years has been extended for another two years (2015-17) now. The Mini Mission I of the plan aims at standardisation, creating common testing facilities and several resource centres with IT infrastructure. Under Mini Mission II, support will be provided to create domestic and export markets for the technical textiles. A favourable environment will be created in the technical textiles sector through incubation centres, research and focus product schemes. Northeast India will be given particular attention for the promotion of agro textiles and geotextiles.
Special package for textile and apparel sector: The government plans to generate over 10 million jobs in the textile industry over the period of next three years. The special package will help to achieve this goal by providing incentives to boost exports, labour- friendly policies and scaling up the production. With the implementation of this package, the exports are expected to increase by $30 billion over the period of three years.
Five times hike in MSME limits, a great relief
Minister of State for Micro, Small and Medium Enterprises (MSMEs) Pratap Chandra Sarangi said that the ministry is implementing various schemes and programmes for promotion and development of the sector. These schemes include: Prime Minister’s Employment Generation Programme (PMEGP), Scheme of Fund for Regeneration of Traditional Industries (SFURTI), A Scheme for Promoting Innovation, Rural Industry and Entrepreneurship (ASPIRE), Entrepreneurship and Skill Development Programme (ESDP), etc. He also mentioned about schemes like Credit Guarantee Fund Scheme for Micro and Small Enterprises, Credit Linked Capital Subsidy – Technology Up-gradation Scheme (CLCS-TUS), Micro & Small Enterprises – Cluster Development Programme (MSE-CDP), National Scheduled Caste and Scheduled Tribe Hub (NSSH), etc.
Under “AtmaNirbhar Bharat Abhiyan” Scheme, the Government has announced a slew of financial relief measures to enable the country to tide over the unprecedented economic crisis being posed by COVID-19. In the said scheme, the Government has focused on farmers and MSMEs. Today, the Cabinet Committee has announced further relief measures focusing on farmers and MSMEs and also hiking the MSP for 14 kharif crops including cotton.
Ashwin Chandran, Chairman, The Southern India Mills’ Association (SIMA) has stated that considerably increasing the investment and sales turnover thresholds for MSMEs, will significantly benefit various segments of textile value chain. He stated that prior to the recently announced changes, the investment limit for a medium sized industry was only Rs 10 crore when compared to the new limit of Rs 50 crore. Increasing the sales turnover limit to Rs 250 crore from the recently announced turnover of Rs 100 crore, while excluding export sales turnover from this calculation, would greatly benefit the highly labour intensive and fragmented textiles and clothing industry. Since most of the decentralised sectors especially powerloom, handloom, knitting, processing, embroidery, garmenting and made-up segments operate on job work basis and where traders play a major role, the new definitions would encourage consolidation and modernisation of the decentralised sectors. This will improve economies of scale, help boost exports and also help to grow the domestic textile and clothing industry.
Chandran has welcomed the allocation of Rs 4,000 crore towards distressed fund to bailout MSME units under NPA category and also allocating Rs 10,000 crore fund on fund to enable the high performing MSME units to get listed in the stock market and gain advantage.
SIMA Chairman welcomed the MSP increase of 4.75 per cent for medium staple cotton and 4.95 per cent for long staple cotton that would greatly benefit the cotton farmers and sustain the area under cotton cultivation. The minimum support price for seed cotton (kapas) for medium staple has been increased from Rs 5255 to Rs 5515 per quintal and for long staple, it has been increased from Rs 5502 to Rs 5825 per quintal. Increasing the minimum support price is not a sustainable solution and the Government needs to focus on bringing back the technology mission on cotton in a revised format, to increase the productivity which is half that of other major cotton producing countries, improve quality by reducing contamination and trash cotton by adopting global best practices, said SIMA Chairman.
The Indian Texpreneurs Federation (ITF) Convenor Prabhu Damodharan feels that the market situation of textiles in India is slowly and gradually recovering, even as the impact of COVID-19 is massive and the recovery would be gradual. He felt that low-end goods, essential goods and value-for-money goods in the textile sector are moving well in the COVID-19 situation but fashionable apparels that depended on showrooms are yet to make a recovery.
Stating that the MSME financial package from the Centre had been helpful in increasing liquidity, Damodharan said people with the eligibility criteria had easy access to get this package benefits.
Avinash Mayekar, MD & CEO, Suvin Advisors, said “With the scenario around, devising strategy post-COVID needs a different spectrum of approaches. Post pandemic, the entire Indian textile industry needs a turnaround change in its strategy. Our strategy should be focused on conquering the larger pie of the textiles and apparel segment in the international market.”
Added Mayekar, “All said and done, if we are not able to achieve the cost competitiveness then it would lead to issues that will hamper our chances of acceptance over China, despite the political pressure. So we need to be cautious about our quality, quantity, price factors and take advantage of the political pressure building up. These crucial factors will act as distinguishing factors to develop long term trade agreements with other countries.”
“At the same time, we need to understand our own, distinguishing factors that will help us or will ensure an upper hand over all the competing countries like Cambodia, Bangladesh, Sri Lanka, Pakistan, etc. for specific categories of cotton products. So the challenge ahead is to score the winning run over other countries on the quality and price parameters. The homework would be clearing the past image of our country for lagging in terms of commitments of deliveries. Hence our focus should be on carving out our name in the market as a reliable partner possible with digital indexing and overall control and monitoring over the entire supply chain management to meet the delivery schedule,” said the MD & CEO of Suvin Advisors.
Growing e-textile market
Technavio has been monitoring the e-textile market and it is poised to grow by $1859.27 million during 2020-2024, progressing at a CAGR of over 18 per cent during the forecast period. The report offers an up-to-date analysis regarding the current market scenario, latest trends and drivers, and the overall market environment.
Euratex’s recovery strategy for textile
Euratex, the European Apparel and Textile Confederation, has come up with a strategy for the future that is supposed to turn the current coronavirus crisis into an opportunity. Part of the strategy, which was endorsed by the last general assembly, is for the industry to become “more digital, sustainable and agile” and five flagship initiatives have been identified in critical areas.
While European textiles and clothing companies have been crucial in providing short-term relief in the crisis, such as converting their production or an increased production of PPE, now long-term goals need to be tackled that involve a renewal process of the sector and its value chain and a more competitive and greener future.
The five flagship initiatives by Euratex include: The first initiative is to organise guaranteed supplies and build resilient value chains in Europe for critical PPE and other textile products to avoid an impact of this magnitude in the future. The second initiative is to make sure to upskill the existing workforce, which is growing older (35 percent is over 50 years old) to meet a rapidly transforming industry and attract well-qualified young workers and professionals to foster innovation and digitalisation. The third initiative is about investing in innovative and sustainable textiles and turning circularity into a source of competitiveness through dedicated public private partnerships (PPPs) at EU level. In addition and as a fourth initiative, Euratex wants to establish five recycling hubs in Europe near existing textile and apparel districts and therefore make raw materials by collecting, sorting, processing and recycling post-production and post-consumption textile waste. The fifth initiative is about ensuring free and fair trade for textile and apparel companies and to promote an integrated ecosystem with the EU’s long standing partners so that goods do not get blocked by national authorities at the borders again in the future.
Mayekar concluded: “There is no doubt that India would increase its share in the global textile trade. Technical textiles are the products required for developing countries like us.”
Measures requested by SRTEPC to Government
Immediate measures:
Announce a special corona-relief package for the textile industry including entire value chain of the MMF textile segment to tide over the prevailing coronavirus crisis as detailed below.
Long-term measures:
– KARTHIK MUTHUVEERAN
