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Resolving infrastructure woes

Poor infrastructure facilities have been taking toll on the competitiveness of the domestic textile base. Towards this end, the government’s recent in- principle approval to the development of four textile clusters, Tirupur, Ludhiana, Amritsar and Panipat, under its Industrial Infrastructure Upgradation Scheme has come at a right time. The authorities must expedite the whole process in order for speedy implementation of all these projects. The scheme is likely to increase competitiveness of the domestic industry through enhanced productivity, lower cost of production and improved product quality. Though the transaction cost in the recent past has come down to a certain extent in the country, the industry is still faced with relatively higher cost as compared to its competitors. The cost of manufacturing has been a major concern for the domestic textile industry which is shortly entering into the post-MFA regime.

A recent comparative cost study carried out by the International Textile Manufacturers’ Federation has pointed out that the high power and borrowing costs have taken their toll on the Indian textile industry, placing it at a competitive disadvantage as compared to its counterparts in other competing countries. According to the survey, the cost of power for the Indian textile industry has been found to be the highest among the competitors. In case of spinning, the electricity cost in India is 21 per cent of the total cost of production, while the same in Indonesia is only six per cent and in the US 10 per cent. The share of electricity cost to the total manufacturing cost for Brazil is 11 per cent, while Korea 13 per cent as also Italy and Turkey 16 per cent each. In texturising, the share of electricity cost to the total manufacturing cost in India is 27 per cent as compared to 14 per cent in Brazil, 12 per cent in Indonesia, 13 per cent in the US, 15 per cent South Korea, 18 per cent, Turkey and 24 per cent in Italy.

Similarly for weaving too, India has been found to be at a competitive disadvantage compared to its competitors due to high power cost. Not only the power cost is the highest in India, but the supply also is not regular. This adds to the cost further due to dependence on alternative source of power supply during non-supply. Apart from this, power cost in India varies from one state to another. This brings about unhealthy competition within the industry, resulting in lopsided development of production base without being truly driven by the economic factors. In the past years, it has been seen that many textile units are shifting base in order to rationalise their input costs. But this has resolved the problem only to a certain extent. The survey also points out that in India, the interest incidence on capital as a percentage to cost of production for the spinning sector is as high as 29 per cent as against 14 per cent and 11 per cent in the US and Italy, respectively. The finance cost in India is still quite high even as significant reduction has taken place in the recent past.