STUDY REPORT ON THE VISION AND EXPORT STRATEGY
FOR MMF TEXTILES CONDUCTED BY CRISIL LTD
The
Synthetic & Rayon Textiles Export Promotion Council had commissioned CRISIL
Infrastructure Advisory to conduct a study for the formulation of an export
strategy and vision for the Indian man-made textile industry. The Study report
was released by Shri D. P. Singh, Secretary, Textiles, Government of India, at
a function held on 4th April 2006 at the World Trade Centre in
Mumbai. The Report gives an in-depth overview of the Indian man-made textile
industry; its strength across the value chain from fibre to fabrics,
segment-wise analysis and inferences, insight into the huge export potential,
disadvantages of adverse duty structure, weaknesses in the weaving sector and the
export Vision for 2010, etc.
Lauding
the SRTEPC for initiating this study, Shri Singh said that the Government was planning to provide Rs
70,000 crores under the TUF Scheme for improvements in the textile processing
sector, which was the weak link. He said such massive investment in machinery
and technology would create a huge demand for manpower in the industry. Hence,
he said that the industry should consider this on a priority basis and ensure
the availability of adequately trained manpower. He suggested a partnership
between the training institutions and the textile industry to ensure the
regular availability of trained labour force.
Pointing out that the TUF Scheme
could not be extended indefinitely, he urged the textile industry to make the
fullest possible use of the Technology Upgradation Fund Scheme (TUF), to
upgrade and modernize their plant and machinery at the earliest. In this
regard, he cautioned that the country should not be converted into a junkyard
of obsolete machinery under the TUF Scheme. He called on the Council and its
member-companies to prepare a well-formulated human resource development
programme to benefit fully from the TUF Scheme. Shri Singh said that the
companies had to scout for the best technology, best machinery and best
partners, which would result in higher and more efficient production in order
to stay competitive.
The Textiles Secretary acknowledged
the imbalance persisting in the Indian industry, as 60% of the world trade was
in MMF textile industry, while in India, the situation was different. He said
that a lot remained to be done and assured that very soon, the Government would
address all the problems of the industry to make India a booming global hub of
textile industry.
Shri Singh urged the Indian MMF
textile industry to shed concerns about China as the Indian industry was fully
capable of withstanding global competition. He said this was evident from the
latest reports the USA that Indian exports of MMF textiles to USA had grown
more than Chinese MMF textile exports to USA.
Shri Singh said that export
promotion organizations should act as catalysts in ensuring the transformation
of companies into proactive organizations. In this regard, He said that on its
part, the Government was aware of the needs of the industry and has already
initiated a number of steps to fulfill the requirements for growth. He said
that the SRTEPC had taken many proactive measures and appreciated the role of
the Council in creating awareness among its member-exporters on various issues.
He called upon other export promotion organizations to emulate SRTEPC.
Echoing the CRISIL study report,
Shri Singh said that the onus was on the firms to reach the vision target of $ 6.1 billion
for the Indian Non-Apparel MMF textiles industry. He said that infrastructural
improvements were a major factor in enhancing the competitiveness of Indian MMF
textiles.
In his welcome address, Shri
Toshniwal, Chairman, SRTEPC, said that this was the first-ever detailed Study
of its kind carried out in respect of the scope, potential and strategy for
Indian synthetic textile exports. He said that the man-made fibre textile
sector occupied an important position in the Indian textile industry. In the
global textile scenario also, India is a leading player being the fourth
largest producer of man-made fibres today. Exports of Manmade Textiles had
reached a level of Rs.9681 crores during 2004-05 and the potential for export
expansion of these textiles is the highest among various categories of
textiles, considering their mass appeal, increased consumer preferences and
growing production all over the world. He observed that manmade Fibres
accounted for more than 60% of world production of textiles at present.
Shri Toshniwal said that In spite of these favourable factors,
the share of man-made textiles from India in world trade was very small, at
2.2%. In addition, more alarmingly, the exports which were growing steadily
have been declining since the last year. The performance showed a decline today
of about 15%. It was in this context
that the Council had commissioned this Study mainly with the objectives of
identifying the reasons for the decline, evaluate the inherent strength of the
industry and prepare a roadmap for this sector to achieve the Vision set for
the year 2010. He said that in this
regard, the Council was encouraged by the decision of the Government to set an
ambitious target of US$50 billion by the year 2010 in which exports of manmade
fibre textiles would also play a significant role.
The SRTEPC Chairman said that the CRISIL Study had firmly
confirmed the Council’s belief in the great potential which lay ahead and the
capability of the Indian manmade fibre textile industry to take up the
challenge with the necessary support from the Government in removing the
various irritants and providing a level playing field. He requested the
Secretary, Textiles to initiate necessary steps in that direction based on the
findings and suggestions contained in the Study Report.
In this regard, he urged the Government to set up an
committee of experts exclusively for the man-made textile sector to draw up a
suitable Action Plan for this industry. It has to be noted that man-made
textile industry has peculiarities of its own which justifies such an action.
The exports of these products, in spite of various assistance measures suffer
from a cost disadvantage to the extent of 20-25%. The Government should also
consider introducing a Special Scheme for the growth of exports of this sector
which would go a long way in achieving the goal of reaching exports of US$6
billion by 2010 as identified in the Study, from US$2.2 billion at present.
Shri Toshniwal said that the Government had taken a number
of positive measures in the recent past to increase production and exports. The
recent reduction in the excise duty on manmade Fibres and yarns from 16% to 8%
will go a long way in increasing the competitiveness of Indian synthetic and
blended textiles in the world markets. The reduction in the customs duty on
man-made fibres to 10% from the existing 15% is also a positive step. However,
with the introduction of 4% CVD on imports, the Customs Duty rate has actually
gone up.
He said that he was also concerned that the DEPB rates for
manmade textile items may be reduced following reduction in Customs duties. He
pointed out that the DEPB rates were reduced drastically by 45% in September
2004 resulting in severe decline in exports of MMF textiles. Although the rates
were partially restored subsequently in December 2004, they were still not
commensurate with the incidental taxes and affected the exports substantially.
He said that it was evident from the statistics that the exports of MMF
textiles were yet to recover from the setback suffered due to such unwarranted
changes in the Policies. Hence, if the manmade textile sector has to achieve
growth in exports, the present DEPB rates should be continued.
Shri Toshniwal said that the Vision and strategy contained
in the Report of the Study is of great relevance to the industry and the exporting
community and urged all concerned to take note of the important findings and
suggestions and avail of the great opportunities for growth.
Some of the important findings, observations and
recommendations of the study are given below.
The Opportunity - $135 billion by
2010
Under the
best case estimates, the world trade in non-apparel MMF textiles is expected to touch $ 135
billion by 2010 growing at 6% per annum. Within the 4 segments of fibre, yarn, fabrics and made-ups, made-ups will be
the fastest-growing segment.
THE INDIAN TEXTILE INDUSTRY SCENARIO
The
Indian industry as a whole is fairly integrated with units present across the
value chain. However, while the fibre and yarn (Spinning) segments are fairly
organized, modern and integrated, fabrics (Weaving) and processing are the weak
links that need to be strengthened. Moreover, the industry is plagued by issues
such as labour productivity, irregularity of power and high power costs and
other infrastructural bottlenecks. The conditions prevailing in each segment
are examined below briefly:
Fibre
– Strong and well established
India has
a multi-fibre base with presence of large players and modern capacities. The
industry has few inherent weaknesses, the most obvious being the excise duty
differential vis-à-vis cotton fibre. Cotton, thus, poses a threat to man-made
fibre. Moreover with crude oil being the raw material, rising oil prices have
significant impact on the industry’s fortunes. The fibre industry faces intense
competition from other Asian suppliers especially China. India’s largest
product segment in exports is polyester staple fibre followed by synthetic tow.
Yarn –
Plagued by an adverse duty structure
The
spinning sector is relatively organized with modern capacities. India also has
diversity in its yarn output. However, the adverse excise duty structure has
made Indian yarn uncompetitive in the export market. Accumulation of cenvat
credit at the yarn stage has made matters worse. Consequently, India is
witnessing an increasing shift towards cotton yarn and this poses a threat for
the growth of the manmade textile sector. India has maximum exports of
Polyester partially oriented yarn and polyester spun yarn. India is in fact a
net importer in the high potential categories of high tenacity yarn, Polyester
filament yarn and nylon filament yarn.
Fabrics
– Need for large-scale improvement
India’s
weaving sector is characterized by fragmented players, outdated technology,
poor quality and practically no presence in the lucrative technical textiles
segment. India thus has limited access to quality-conscious European and US
markets. Moreover a fragmented industry negatively impacts marketing abilities
of the weavers. However, India can capitalize on its strong artistic skills,
provided fabric quality is consistent. The obvious positioning for India is a
niche player with variety. However, the weaknesses in the weaving segment,
productivity and poor processing abilities can hurt long term interests in this
market.
Further,
the lucre of the domestic market is high, but the threat of price fall in
domestic markets is greater given that even imported fabric costs are lower
than the price India exports its fabrics at (for instance Polyester filament
fabric imported from China is available at half the rate at which India can
supply the same fabric). China, on the other hand, has positioned its industry
as a low cost scale and volume player with consistent quality.
India is
a net importer in the high growth segments of technical textiles, knitted
fabrics, non-wovens and special wovens. At present, the largest segments are
Polyester Filament and Polyester Viscose Fabrics.
Made-ups – Limited Success with
scope for Improvement
India,
with 19% of its exports in made-ups, has already experienced the benefits of value
added exports in a limited way. India’s artistic skills and variety of designs
have given it an edge in various markets. However, India faces strong
competition from Pakistan Bangladesh and China in terms of cost. Further, our
inconsistent fabric quality makes it difficult for made-ups manufacturers to
source large quantities. Despite these weaknesses, India’s top destinations for
made-ups are US, EU and Canada.
Vision 2010 - Strive for $6.1
billion exports by 2010
India’s
total textiles and clothing exports potential is estimated at $ 40 billion in
2010. Of this, close to $ 34 billion is likely to be apparels and non MMF
textiles. The Indian
non-apparel manmade textiles industry should thus strive to achieve $ 6.1
billion growing at 19% per annum. This will ensure that India doubles its
share in world trade in non-apparel MMF textiles from 2.2% to 4.4%.
Although
it may be argued that this is a an over-optimistic target, CRISIL’s view is
that it is an aspirational target which can be achieved provided the
stakeholders in the industry i.e. the Government, Industry associations
and above all, the firms’ focus on
implementing the recommended strategy to improve India’s global
competitiveness. CRISIL has laid down a roadmap for each of the stakeholders.
Recommendations to stakeholders –
Roadmap for Success
The study
identifies specific areas where each stakeholder needs to take steps so that
India can achieve its vision for $ 6.1 billion exports by 2010. The Government needs to facilitate investments and provide a level playing field. The
Government’s role is to provide an environment, which is fair for every segment
of the textiles industry and, which encourages investment into the sector.
The
Government needs to promote the domestic use of technical textiles, so that
capacities are set up, which, in turn, will support exports. Labour reforms are
the need of the hour to achieve higher levels of productivity and gain an edge
over our Asian counterparts. In order to encourage modernization, the Technology Upgradation
Fund Scheme needs to be extended with certain
improvements/modifications. The Government also needs to pursue regional/ preferential trade agreements in earnest and
strive to eliminate
infrastructural bottlenecks.
The onus is on firms
The study
report places the onus on the firms and says that the firms should take the
initiative and not wait for other stakeholders to act. The firms are the focal
point for any change that is to happen in the Indian MMF textiles industry.
Each of the segments i.e. fibre, yarn, fabrics and made-ups has been provided
with specific strategies to take full advantage of the opportunities and to
overcome any weaknesses that are present in their industry segment. These have
been elaborated in the main report. Specific
product segments and geographies to be targeted are provided. The
emphasis is on the firms to align with market realities.
Conclusion
India is
on the threshold of a textile revolution. With the phasing out of quotas, the
opportunity is there for the taking. However intense competition from other
Asian countries is what India will have to cope with and try and counter. China
is already way ahead and India needs to realize that it may not be in a
position to replicate the China model in totality for a variety of reasons. It
is thus important that India consolidates its strengths and builds for
sustainability in the global markets. This is only possible with collective
efforts by each of the stakeholders.
However, the Study places the onus on the firms to reach the vision target of $ 6.1 billion for the Indian Non-Apparel MMF textiles industry. It is imperative that they cater to the markets needs, achieve cost competitiveness and provide superior quality by way of scale and modern technology.
REF:MR/CIR/2006/1428
15th April 2006
MEMBERS
OF THE COUNCIL
Subject: “Report on Export Strategy & Vision
for Indian Man made fibre
textile industry conducted by
CRISIL”
The council had
commissioned well-known Market research agency M/S. CRISIL Ltd. to conduct a
study on Vision and Export Strategy for Indian MMF textile Industry. The
objectives of the study were to evaluate the inherent strength of the industry
vis-à-vis global outlook and to prepare a road map for the MMF sector to
achieve the vision set for the year 2010.
The Study Report was
released by Shri D. P. Singh, Secretary (Textiles), Government of India on 4th
April 2006 at a special function held in World Trade Centre, Cuffe Parade,
Mumbai.
This is the
first-ever detailed study of its kind carried out in respect of finding out the
scope and strategy for Indian MMF textile exports. The Report gives an in-depth
view of the man-made textile industry of the country; its strength across the
value chain from fibre to fabrics, segment-wise analysis and inferences, insight
into the huge export potential, including product-wise global demand,
identification of major markets, demand trends and forecasts, world trade in MMF
in general etc. and suggested marketing strategy for the export vision for 2010.
The study has firmly
confirmed the great potential of the industry and its capability to take up the
present challenges in the global market. The study envisages a three-fold increase in exports of
man-made textiles from the present level of Rs.9,681 crore to Rs. 28,000 crore
by the year 2010.
A copy of the Report
can be obtained from the Council by making payment as follows:
Members
of the Council:
Only CD :Rs.1,000/-
Hard copy and CD: Rs.1,500/-
Non-members of the Council: Hard copy and CD:
Rs.2,500/-
Foreign subscription:
Hard copy and CD:
USD 500/-
Courier Charges Extra: Rs.150/- in India and USD 25/- for Overseas.