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ITMA birmingham 2003

The Indian textile engineering industry: Problems and prospects

Dr D Jayavarthanavelu

“The customer is the most important visitor to our establishment. He is not dependent on us. We depend on him. He does not disrupt us in our work. He is the purpose of it. He is not an alien in our business. He is part of it. We do not do him a favour when we serve him. He does us a favour by making it possible for us.” - Mahatma Gandhi

Introduction

Textiles and allied activities constitute a significant element of the economy of several countries of the world. The textile engineering industry forms the technological base for the advancement of the textile industry. Put together, these two industries contribute handsomely to the economic progress of the textile producing countries by providing employment, promoting exports, clothing the teeming millions and aiding the GDP growth.

World population had crossed six billion by the end of 2001 and will grow further in the years to come. Asia accounts for 3.6 billion people or about 60 per cent of the world population. The clothing needs of the world community will grow at a fairly high rate, more so with the improvement in living standards in the thickly populated countries like China, India, Indonesia, Pakistan and several other nations. It is the primary responsibility of the textile and the clothing industry to respond to this emerging demand. The textile engineering industry will have to attune itself to equip and retool the textile industry in tandem.

Global profile of TEI

The annual world production of textile machinery is estimated at US$ 20 billion. Of this, Germany (US$ 3.6 billion), Switzerland (US$ 3 billion) and Italy (US$ 3 billion) account for more than 50 per cent of the supplies. The other major producers are Japan, USA, UK, Taiwan, Korea, China and India. According to the latest figures available, the ring spinning capacity around the globe is about 168 million spindles. Of this, a little less than 150 million spindles are located in Asia and Oceania, Latin America, East Europe, Africa and other developing countries. Similarly, out of about 7.68 million OE rotors, about 5 million is accounted for by these countries. In the case of weaving, shuttle looms in the world number 4.58 million and shuttleless looms 0.71 million. The population of these looms is also distributed predominantly in the southern hemisphere. The migration in production capacity from the north to south has led to the production of more than 66 per cent textiles in the southern region. If we reckon an average growth rate of six per cent in demand for textiles annually and provide for modest expansion in capacity, the textile engineering sector will have a steady secular demand on this score. In addition, there is cumulative demand for modernisation and technological upgradation from most of the textile producing countries.

Demand perception

The TEI derives its demand essentially through expansion, modernisation and technological upgradation of the textile units. As this is a continuous process, the TEI has to be alert and responsive to customer needs all the time. Measured on the global scale the opportunity to acquire business from some textile producer or the other is alluring. While it is difficult to quantify the obsolete and run-down capacity of the globe in the spinning sector, it would not be off the mark to assess about 40 million spindles calling for revocation or replacement. Similarly, in the weaving sector, the obsolete capacity can be estimated as 1.5 million shuttle looms. The finishing capacity will also account for about 30 per cent obsolescence.

The potential market for the TEI across the globe is vast and promising. However, in actual experience the textile machinery units are struggling for survival and several of them are on the margin of exit. This apparent paradox arises due to a variety of internal and external factors.

Apparent paradox

In the first place, the demand for textile machinery and accessories depends on the investment decisions of the textile producers. In turn, the textile units have to enjoy stable profitability and prospects of improved markets at home and abroad to induce them to invest. Unfortunately, neither the domestic consumer market nor the export markets for textiles have infused confidence of stability in the last few years. In addition, the fiscal distortions, unhealthy competition amongst small, medium and large scale manufacturers and deliberate policy towards fragmentation, especially of weaving, finishing and knitting in countries like India have unleashed their backlash on the textile engineering units in the form of prolonged recession or shrinking orders for state-of-the-art equipments.

Secondly, the accumulated losses of the large textile units in the important textile producing countries did not provide them with any financial strength and such emaciated units had no option but to close down. As a result, the TEI lost valuable business opportunities.

Thirdly, the decentralised weaving and finishing units in countries like India never looked forward to modernisation or technological upgradation as they catered to the lower end of the trade and the policy framework did not fit in with their special problems and needs. The TEI could not look to these sectors for viable and sustainable supplies.

Fourthly, the textile engineering units themselves were dependent on borrowed technology in the developing countries. The collaborator had imposed restrictions and hence the technology offered was not the most upto date. The indigenous units had also not invested in research & development to meet the deficiencies.

Lastly, the liberalised trade policy indiscriminately allowed import of used textile machinery and accessories resulting in substantial erosion of demand for new textile machinery from the domestic TEI.

It will thus be seen that the factors inhibiting the progress of the TEI are many and varied and have to be addressed by the textile machinery industry with appropriate back-up and support measures from the governments concerned and the textile industry.

Indian scene

The Sathyam Committee in its chapter on “Overview of the Textile Industry” observes: “The Indian textile industry has also significant presence in the world textile economy by virtue of its contribution to world textile capacity and production of textile fibres/yarns. This industry contributes about 20 per cent to the world spindleage of 166.36 mn spindles and three per cent to the world rotorage of 7.81 mn and has the second highest spindleage in the world after China. With almost 5.7 mn looms (including handlooms), this industry has also the highest loomage (including handlooms) in the world and contributes about 64 per cent to the 8.9 mn world loomage. Even excluding handlooms, this industry contributes 42 per cent to the world loomage of 4.38 mn. The contribution of this industry to the world production of textile fibres and yarns including jute at about 6.0 mn tons is about 12 per cent. In the world textile scenario, it is the largest producer of jute, second largest producer of silk, third largest producer of cotton and cellulosic fibre/yarn and fifth largest producer of synthetic fibre/yarn. It is also the third largest producer of cotton yarn.” It is alarming to see that India ensconces 20 per cent of world spindleage and 42 per cent of the world loomage (excluding handlooms) and 64 per cent if handlooms are taken into account. By any reckoning, the capacity is far in excess and the scope for restructuring the spinning and weaving capacities is enormous. The Tenth Five Year Plan (2002-2007) has projected an aggregate spun yarn target of 4,150 million kgs. It is estimated that 30 million spindles and 4 lakh rotors would be adequate to meet the target.

Spinning - world standard machinery

From the total of about 37 million currently installed, at least 10 million spindles can be scrapped. Another 15 million spindles have to be modernised during the Tenth Plan period. About 3 million new spindles may be installed to achieve the requirement of 30 million spindles.

As the premier producer of ring spindles, I can boldly comment that the technology available in the country for ring spinning and back processes is of world standard. The current capacity can meet the projected modernisation and expansion needs of the Tenth Plan with enough exportable surplus. There is, therefore, no scope for import of either new or used spinning machinery and any such suggestions should be resisted resolutely.

Ambitious weaving modernisation

In regard to loomage the situation is somewhat different. The Tenth Plan has projected a target of 45,500 million sq mtrs of cloth production by the end of the Plan. The weaving equipments in the country are far in excess and the decentralised powerlooms occupy a dominant place. The National Textile Policy - 2000 has envisaged modernisation of 2.50 lakh ordinary looms into semi-automatic/automatic looms and induction of 50,000 shuttleless looms by 2004. The plan is ambitious and the local loom makers have to strive hard to carve a lion’s share of business with the cooperation of the decentralised powerloom sector and adequate support measures from the government.

Textile processing sector

The importance of the finishing sector arises from the fact that it contributes substantially to value-addition. The textile processing sector is classified into three major categories viz. composite, semi-composite and independent process houses. They are further bifurcated into small scale sector and non-small scale industries. It is estimated that there are 2,324 units in the country 60 per cent of which belong to SSI sector.

The vintage of the machines installed are 19 per cent of pre-1980 period, nine per cent of 1981-85, followed by 21 per cent of 1986-90, 27 per cent of 1991-95 and an addition of more than 22 per cent of 1996-99 period. The fixed investment in the processing sector in the country is estimated at Rs 6,388 crore (US$ 1330 million), 25 per cent of which is held by the composite sector, 23 per cent by the semi-composite sector and the balance 52 per cent by the independent sector. It is observed that only 227 units are of modern technology while 1,775 units are of medium technology and 322 are obsolete technology units.

In a nutshell, the processing and finishing textile sector is facing the problems of low technology, poor financial health, non-availability of credit to run day-to-day business and creation of fixed capital for modernisation, labour issues, non-availability of quality raw materials, inadequate job, poor power supply, shortage of water supply, etc.

Upgradation of technology and modernisation of a large segment of the processing sector is urgently called for. The productive base and value-addition can be strengthened only if modern equipments are added to the finishing sector.

Impact of MFA dismantling

The quantitative restrictions in Textile Trade Policy ingrained in the Multi-Fibre Arrangement (MFA) is due to be dismantled by the end of 2004. The textile industry the world over is engaged in a rejuvenation effort to meet the new challenges in the international as well as the domestic markets beyond 2004. In India, the National Textile Policy - 2000 outlines the measures to gear up to the emerging situation. However, a serious omission in the NTP-2000 is the failure to recognise the role of the textile engineering industry and its capability to contribute significantly towards the restructuring and technological upgradation of the textile industry.

Technology Upgradation Fund Scheme (TUFS)

The high cost of capital was identified as one of the basic factors that stymied investment in technology upgradation in the textile industry. Though India is endowed with a strong indigenous raw material base, skilled technical manpower, marketing expertise and competitive labour cost, because of the absence of internationally comparable capital costs, modernisation and restructuring of the textile sector had suffered. In order to improve competitiveness and long term viability and at the same time tackle the huge backlog of technology upgradation, a focussed and timebound Technology Upgradation Fund Scheme (TUFS) was launched by the government of India in April 1999. The main feature of the scheme was a five per cent reimbursement on the interest actually charged by the financial institutions and banks on the sanctioned projects. The TUFS was expected to provide a shot in the arm to the indigenous textile engineering industry. However, the scheme has not caught up the anticipated momentum due to a variety of factors. It is suggested that a quick review of the scheme be undertaken to set right the deficiencies and the scheme be made more attractive and friendly, especially to the decentralised sector.

The textile engineering industry over its existence of about five decades has developed rapidly both in strength and quality and has become on of the foremost industries in the engineering sector. It has built up an annual capacity of US$ 775 million to produce textile machinery, parts and accessories of modern machines generally. The TEI is producing the entire range of textile machinery right from opening of the fibres (cotton and synthetics). The industry is supported by vital ancillary and textile testing and monitoring sectors.

Despite the uncertainties in demand, but in line with the opening up of the economy and trade, the TEI has kept itself abreast with the technological developments in developed countries like Europe, UK, USA, Japan, Korea to meet the challenges facing the industry both domestically and internationally. In this context it is appropriate to draw attention to the collaborations and joint ventures under different sections of textile machinery.

Import of used machinery

The Indian TEI is passing through a difficult demand recession. Consequently, the capacity utilisation has dropped to around 30-35 per cent. The major factor that has contributed to the shrinkage in demand is the import of used textile machinery. It has surged during the last few years. The import of such machinery can harm the long term interests of the textile industry as a junk-yard will get built-up. It would be in the interest of both the indigenous textile industry and the textile engineering industry to get together and meet this challenge so that the interests of the local TEI and textile industry are taken care of.

TUFS for textile machinery

If the TUF Scheme for textile industry is revamped and back-up measures to strengthen the TEI are invigorated, there will be a huge potential demand for textile machinery in the future. To cope with such a situation, the textile machinery industry has to modernise its plant and machinery. The textile machinery industry has to be encouraged to invest in technology and modernise itself to meet the demand for state-of-the-art machines. It is, therefore, essential that a Technology Upgradation Fund for this sector be set up with a corpus of about Rs 1,500 crore for a period of five years on terms similar to TUFS for the textile industry.

Conclusion

The textile engineering industry all over the world has to be conscious that it caters to the consumer textile industry which is highly demanding in its requirements. The TEI has to treat the textile industry as sovereign and do its very best to satisfy its technological, energy saving and environmental needs. In the highly competitive regime quality, productivity, price advantage and trouble-free performance will determine the consumer preference.

(The author is chairman & managing director, M/s Lakshmi Machine Works Limited)