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Will duty reductions and technology upgradation alone lead to competitiveness?

MY SPACE

R R Gosai, Joint General Manager, Gherzi Eastern

‘The industry has to simultaneously work on product dvpt, pricing strategies, to complement end products.’

The finance minister in the Union Budget 2003-04, has made a move towards duty rationalisation, and has brought down excise and customs duties on a number of textile and related items. Will this result in the textile industry attaining international competitiveness? I think not unless our fibre suppliers take on a complementary role with the forward processes. Even as these steps may help to some extent, what is needed is attacking the entire value chain right from fibre to retailing. What is needed is product development and innovation with proper pricing strategy, which are lacking in every segment of the textile industry.

Looking at the very well developed corporate structure in manmade fibre sector, it is surprising that there too research and product development aspects have been neglected, especially in viscose. Grasim has a virtual monopoly in viscose in India, but has failed to develop any new products even after so many years, despite having the funds for development. Many viscose based fibres such as Modal, Lyocell, Tencel are developed by international viscose majors where as our major viscose manufacturer has not been able to innovate, because R&D is not given much importance today. And these new products are eating into the market share of the Indian viscose manufacturers.

Rayon has been identified as a versatile fibre, with immense potential, which can to a very large extent replicate the comfort features of cotton, at the price of MMF. So, what is it that prevents Indian manufacturers to take up research and development in viscose fibres, and in the end applications of the fibres? Product development would lead to a wider user base, and ultimately help our textile manufacturers. This sector has been already losing its share to polyester, and if viscose manufacturers do not take positive action soon, they may well find it difficult to survive in the next 10-15 years, compelling them to leave the field open to polyester.

This will be especially true as today the polyester fibre manufacturers are developing a lot of innovative products, and incorporating features that even imitate the comfort qualities of cotton. Polyester is fast increasing its share in the domestic market due to this and the price factor. However, our major polyester fibre manufacturer still needs to work on the pricing strategy, basing it on the actual production cost, rather than the demand-supply position. The present pricing strategy of our major polyester fibre producer does not help the user industry to realise better prices and gain competitiveness on their product range largely due to fluctuating prices of polyester fibre.

In short, the MMF sector has to focus on product development for better prices, and on increasing the user base, while following a pricing strategy that also helps the user industry to adopt a competitive price pattern.

Coming to cotton, the recent Gherzi study for TEXPROCIL has recommended a reduction in the price of cotton by at least 10 per cent, to make the Indian cotton textile industry competitive. For this the cost of production of fibre has to come down, so that the profitability of the fibre producers is unaffected even after reduction in the sales price of cotton.

It is a well known fact that even though India is among the largest cotton producers in the world, low cotton yield in India makes locally grown cotton costlier compared to international cotton, as also Chinese cotton, at a time when China is the biggest threat to our industry.

Maharashtra is the second largest cotton growing state in India, and has the lowest yield. This obviously points towards inefficient production practices, and high costs. Another problem is cotton contamination. The key to all these problems is lack of mechanisation in cotton farming. But with the current cotton farming structure and practices followed by small farmers this is not possible. The only answer is corporate farming. Cotton yields can improve even in the face of water scarcity, if drip irrigation, or sprinkler system is adopted, which needs investment and this and only the corporates can bring in. However for entry of corporates in cotton farming the major hindrance is the Land Ceiling Act. So the agricultural ministry, if it wants to improve cotton farming, has to amend this act.

Another way of involving the corporate sector in cotton farming, is that corporates take the initiative of forming cotton growing cooperative societies, and create a ‘farmhouse’ concept. The corporates will have to support the farmers in desired investment so as to produce contamination-free fibre at lower cost, and also provide marketing support. The lead will have to be taken by the cotton yarn spinners. This is the only way to improve cotton yield, bring down the cost of production, and improve margins for all concerned.

How far is the fibre sector moving in these directions?

(As told to Reena Mital)