Some of the big overseas buyers have moved out in the last two years
It has taken a bad hit, but not fatal. That's Tirupur today. The Tirupur knitwear export industry that registered 10-15 per cent growth every year is seeing business down with problems that started almost four years ago, though there are hopes of revival.
The problems started in 2007-08 with the rupee appreciating against the dollar. Then, it was losses in forex derivatives, slowdown in the U.S., closing down of processing units, and now the economic slowdown in the European Union. While all these have had an impact on exports, what worries Tirupur more is that its garments are becoming expensive in the international market. Some of the big overseas buyers have moved out of the Indian knitwear town to Bangladesh in the last two years. Business is estimated to have dropped by nearly 25 per cent.
“The cost of inputs have gone up in Tirupur. We have lost a lot of business to Bangladesh,” says V. Elangovan, Managing Director of SNQS International Group. Tirupur has almost two dozen knitwear exporters who have integrated facilities — spinning, knitting, processing, and garmenting. There are also nearly 750 direct exporters. Apart from the industries that cater to the domestic market, there are thousands of small units that take up sub-contracted work. Its industrial infrastructure includes inland container depots, apparel park, accessory making units, buying houses, and support services.
If Tirupur had grown at its usual pace, it would have touched annual exports of Rs.18,000 crore. However, it will be just about Rs.12,000 crore this year, says A. Sakthivel, Chairman of Apparel Export Promotion Council (AEPC). More than three lakh workers were employed in the Tirupur knitwear industry and 70,000 to one lakh are said to have moved out, says M. Chandran, CITU's Tirupur District Secretary.
In February last year, over 700 textile processing units in Tirupur cluster were closed following a Madras High Court order for not achieving zero liquid discharge. Now, 100 of these have resumed operations after meeting the pollution control norms.
Meanwhile, several manufacturers have started sending the fabrics to processing houses in other cities in the State and Karnataka, Gujarat and the North. Processing fabrics with dark colours used to cost Rs.80-90 a kg and payments were made after ensuring quality at the manufacturing unit. Now, it is Rs.120-140 a kg as the fabric is processed in other cities, payments are made in advance and there is no guarantee of getting the processed fabric on time, says a garment-making unit owner.
The smaller manufacturers are apprehensive of even taking up orders for samples as they will not be able to meet buyers' costs and schedule, he says.
Wages and dyeing and finishing charges in Tirupur are more than 15 per cent higher compared to Bangladesh, say a couple of leading exporters in the town. A hanger manufacturer hiked the per unit price by Rs.10 recently because of the increasing use of generator sets to tide over the power problem. These are small factors that add to the costs, they point out.
Nearly 60 per cent of Tirupur's export supply is to the European Union. With the economic slowdown in the European countries, orders have dropped. Further, Bangladesh has zero duty access to the European Union under the General System of Preferences. This makes Bangladesh goods cheaper by 10 per cent. A large number of international brands say that they are able to get goods at lower prices from other countries, add the exporters. The loss of the knitwear sector is felt across the town. Rentals are flat, several houses and transport vehicles are without customers, and small traders are shutting shop.
Navaneethakumar, who was involved in constructing effluent treatment plants for the last 15 years, has shifted to Bangalore. Be it housing or industrial, there are hardly any new projects coming up in Tirupur during the last one year, he says. Shankar, who is in the garment business for more than three decades, is taking up job work instead of direct orders. “We cannot buy any input on credit. There are no profits in cash operations. So, many are struggling to continue business,” he says.
Tirupur should move to multi-fibre merchandise, value addition and to the fashion segment. Some large-scale exporters have already started working on these lines, adds Mr. Elangovan. “One of the reasons for the high rates in Tirupur is the high finance cost,” adds Mr. Sakthivel. “We are helping the sector move to manufacture of synthetic garments, too. At the AEPC, we are encouraging exporters to look at markets such as South Africa, Japan and Latin America,” he adds. Tirupur has invested in technology and infrastructure. The town has all the required facilities and capacities. With diversification of market and orders, it should revive, he says. The proposed India-European Union Free Trade Agreement will also help the manufacturers compete with other countries as it is expected to give them zero duty access, add industry sources.