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‘Vibrancy lies in fibres like polyester, the growth area for the future’

The textile industry is currently passing through a transition phase, even as there exists inter as well as intra industry challenges. What industry requires today is a well-chalked out action plan for smooth entry into a post-MFA regime. In an exclusive interview with Arbind Gupta, Mr O P Lohia, managing director, Indo Rama calls for formulation of a focussed strategy for the industry. Excerpts.

Despite being the largest foreign exchange earner for the country, the textile industry has failed to find government’s adequate support in the past. Where is the industry heading for in the changing trade order?

Though the government of late has realised the significance of this industry, the measures initiated have not been to the expected level. We are still very slow in implementing the whole process of reforms. Our strategy so far has been just to protect inefficient capacities at the cost of efficient ones. This will only lead to an emergence of a very dangerous situation from where the industry will find itself hard to compete in the global trade order. It is high time that the authorities put their act together and come out with a reasonable strategy for the industry.

But now when the government has formulated a new textile policy, do you foresee any change in the fortune of this beleaguered industry?

In fact the basic concept of the entire policy is wrong. There is lack of focus. We need to bring about radical changes in our approach. We have not been able to prioritise our efforts. It is time we should concentrate on growth areas rather than continuing with the areas where we have reached a level of saturation. This will not only infuse vibrancy into the industry, but will also generate substantial employment which is the most crucial factor so far as the Indian economy is concerned. The whole policy so far has been confined to a simple document. There is no mention about as to how to achieve the measures documented in the policy. In other words, still no road map has been drawn towards implementing the policy measures.

How do you compare the Chinese industry with that of Indian? Why has China been able to attain such an attractive growth despite the sluggish global market?

Today, we are nowhere near China which has totally transformed its economy in the last couple of years. As against ours 3-4 per cent growth of ours, the Chinese economy is growing at an average rate of over 15 per cent. Most importantly, they have been able to sustain this growth. All this is because, they have grabbed all the opportunities coming their way. But unfortunately, we have not been able to do so due to more than one reason. Currently, the Indian industry is not only facing external but also internal hurdles. The government is yet to completely eliminate the discrepancies existing in the duty structure. Moreover, our policies are lopsided.

As against global trend, the domestic polyester industry has been unable to post a very satisfactory performance in the past. What does the future hold for this sector?

It is well known that over the years, our policy has tilted towards cotton. We have been trying to impose cotton on consumers despite the fact that there exist more competitive fibres. Consumers should be allowed to exercise their option without any interference. Affordability should be the key factor. In my view, there should be uniform duty (i.e 8 per cent) across all fibres. Besides, we need to rationalise the duty structure. This will provide a level playing field towards a holistic development of the industry which is still not fully driven by market forces. So far as cotton is concerned, we have reached a level of stagnation. In fact, vibrancy lies in fibres like polyester which is considered to be the growth area for the future. Today, there is need to explore areas with faster growth for the overall interest of the industry.

The growth in consumption of manmade fibres over the past six years has been healthy with a CAGR of over 10 per cent. This has primarily been triggered by a consistent increase in polyester consumption. During 1995-01 period, polyester consumption has clocked a CAGR of close to 15 per cent. At 1.4 kg, India’s per capita consumption of polyester is way behind the US (8 kg) and the world average (3 kg). This reveals a significant growth opportunity for the domestic polyester industry.

In the past few years, the polyester industry has been undergoing a consolidation phase. We have seen Reliance acquiring few capacities in the recent past. Is Indo Rama considering any such move in future?

It is good to see the industry getting consolidated to face future challenges. Currently, at Indo Rama we don’t have any such acquisition plans. In fact, we don’t see any efficient capacity existing to be acquired.