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‘We are late by at least five years’

Will the industry be able to face the WTO challenges? Will it be able to face competition from China? Will it be able to hold on to its market shares, and reduce lead times? Mr Lalit P Desai, chairman, Cotton Textiles Export Promotion Council (TEXPROCIL), in an interview with Reena Mital, addresses some of these concerns of the industry.

Do you feel that the Indian textile industry will be able to face the post-2004 challenges?

The industry has begun preparing for the free trade regime, but I would say we are late by at least five years. It is only recently that the industry started serious discussions with the government about the need for policy changes, and started sending out delegations to various markets to assess the situation and the potential for our products. It is sad that till even as late as 2002, most textile players were not really interested in reinvesting in the industry. The reasons were the very poor returns in this industry, the government policies which did not encourage efficiency and competitiveness.

In 2002-03 especially, the China factor came into sharp focus, and we realised that China was moving very fast, had set definite targets to becoming the world’s largest supplier of textiles, made-ups, garments, had planned well-defined strategies, and was implementing the same efficiently and in a timely manner; and was succeeding in its aim of becoming the largest textile and clothing supplier. This is when the Indian industry also woke up to the threat. It is unfortunate that this awareness took so long, especially when India has such a well-integrated textile structure. However, the industry stagnated because it did not modernise with the times, no meaningful expansions have taken place, and the industry did not achieve competitiveness by way of price and quality. But now, things have begun moving, both the government and the industry have begun taking the challenges seriously, and are working towards a common goal. And we are witnessing some activity.

What are the areas that are witnessing activity?

Investments and policy initiatives are taking place in weaving and processing, the weak links of the textile chain. In the next two years, we can expect to see at least 10-12 state-of-the-art processing units coming up, while a number of existing players are also modernising and expanding. Similarly, in weaving, investments will take place in setting up shuttleless capacities. All this will go towards increasing value-addition of fabrics, and will lead to good export growth.

Moreover, the industry should realise the export potential for quality processed fabrics. At least one processing plant is closing down every 15 days in the US and the EU. Most of the big textile corporates in these regions are unable to compete on the price front, and 90 per cent of the textile players are out of processing. In the EU, only countries like Italy, Spain, Portugal may continue to be important players, due to the specialisation they have achieved in this segment. UK, which till five years back had 15 giant finishing plants, today has only two, and these could also close down soon. So, processed fabrics will have to be sourced from countries like China, India, etc.

China has already achieved a significant share of the global textile trade, can India compete with China?

China was definitely posing a very serious threat to India and other textile manufacturing countries, but with SARS and other problems last year, foreign buyers have realised that they cannot put all their eggs in one basket. And are looking at India as an important textile supplier. Most big buyers - M&S, Gap, Walmart - have set up offices in India, and are scouting for the right partners. In fact, I expect a number of large textile players and exporters to forward integrate into made-ups and garments.

So, India can become a strong player, but internal problems need to be addressed - taxation, refunds, rates of interest, power, labour.

Even as costs to a large extent can be handled by the industry, lead times is something over which it does not have much control...

Yes, this is a problem faced by the industry, even as the situation has improved to quite an extent over the years. Port infrastructure needs to be improved, it is happening but at a slow pace. Another factor affecting lead time is the stock availability. The industry has to work out solutions to reduce lead times at least at its end.