Demand recession: textile units fear worse days

CRISIS LOOMS LARGE: Autoconers at a spinning mill in Coimbatore.   | Photo Credit: — Photo: K. Ananthan

M. Soundariya Preetha

Investments confined to replacements, maintenance

Exports will be lower this year, feels industry

Slowdown will be reflected in the coming months

COIMBATORE: The Indian textile industry, confronting a host of issues, fears worse days ahead, at least for another six months.

Textile and clothing exports were targeted to reach $26.55 billion in 2008-09. An official of the Union Ministry of Textile said if the current trend were to persist, exports might be the same as last fiscal ($22.13 billion). The industry is of the opinion that the year may end with lower exports of just about $20 billion.

During the first four months of this financial year, textile exports went up by 10-14 per cent in terms of value. Subsequently, there was a decline, indicates D. K. Nair, Secretary General, Confederation of Indian Textile Industry (CITI). Buyers in the U.S. and European Union were buying less and at lower prices.

Exports in the first five months relate to orders received earlier. The slowdown in the market will now get reflected in the coming months. For several orders already obtained, buyers were seeking either delayed delivery or just 70 or 80 per cent of the shipments, Mr. Nair said.

The core problem for the industry now is the global demand recession, says V. S. Velayutham, Chairman, Cotton Textiles Export Promotion Council.

For the last one year, there had been issues such as appreciation of the rupee against the dollar, spiralling cotton prices, power shortage and hardening of interest rates. But, the main problem is that the market had not grown in proportion to the capacity additions. Instead, demand was declining, he said.

In the case of investments, projects worth Rs. 19,917 crore were sanctioned under the Technology Upgradation Fund Scheme in 2007-08. For the current financial year, projects worth Rs. 6,509 crore were sanctioned till the end of September 2008 and the official expects the total value of projects sanctioned to go up to about Rs. 12,000 crore for the entire year. The industry contends that it will be just Rs. 9,000-10,000 crore.

According to CITI, the second quarter results of 50 major textile companies showed a decline in net profit, and in many cases, there were losses. The Index of Industrial Production for the textile sector for April-October declined by 0.2 per cent as against the same period last year.

With the slowdown, investments happening in the sector now are mainly for replacements and maintenance. When about 30 per cent of the capacity is lying idle, why the units go in for additional capacities, asks Mr. Nair. In such a scenario, the industry has to offer goods at competitive prices to overseas buyers. Main problems such as high domestic price of cotton and interest rate for working capital loan need to be addressed, they said.