Post-Covid-19 Scenario: Indian Textile Industry Looks To Wriggle Out Of A Tight Spot To Cash In On Anti-Chinese Sentiments

India’s textile and clothing (T&C) exports have witnessed a roller coaster rider over the last six years.

After rising to a record $37.66 billion in the 2014-15 (April-March) financial year, the performance has been mixed — up and down.

Exports have been hovering between $36 billion and $37 billion with the highest being $37.49 billion during 2018-19, according to The Cotton Textiles Export Promotion Council (TEXPROCIL).

During January-June last year, India’s T&C exports had dropped 2.24 per cent to $18.96 billion with cotton textiles exports being the main drag.

TEXPROCIL said that during April-October of 2019-20 fiscal, cotton textiles exports dropped 22 per cent to $5.58 billion compared with the previous year.

Segment-wise, TEXPROCIL projected a 22 per cent fall in textiles exports, 37.45 per cent drop in cotton yarn shipments, and a 73 per cent slide in raw cotton exports for the 2019-20 fiscal.

On the other hand, shipments of cotton fabrics and made-ups were projected to have increased by two per cent, while those of other textile yarn and fabric made-up articles, by 8.06 per cent.

“The textile industry was already in bad shape before Coronavirus pandemic struck. The nation-wide lockdown from 24 March has caused a lot of problems,” said Dr K Selvaraju, Secretary-General, Southern India Mills Association (SIMA).

The association represents the entire textile value chain link in south India.

In view of the lockdown, textile mills have been burdened with high overhead costs. They have to manage migrant workers, who have been trapped in the lockdown far away from their homes, by providing them food and healthcare.

One of the mills has been left to manage 25,000 migrant workers.

“Keeping young migrant workers 100 per cent idle for over a month is difficult,” said Selvaraju.

The textiles industry, including apparels, provides employment to 45 million people in the country, next only to agriculture.

“The current situation in the textiles industry is very bad. We have orders on hand, but are unable to lift materials. Our dues are pending with the buyers, while suppliers are seeking payment,” said A Sakthivel, Chairman, Apparel Export Promotion Council (AEPC).

“There is zero cash flow for us. We are not sure when we will get our receivables. Today, cash flow is a major problem after production loss. It is a pain point for us,” said the SIMA Secretary-General.

“Until the lockdown was announced, we were witnessing good demand. The garment industry, too, had good orders on hand. The cycle stopped all of a sudden,” said Anand Popat, a Gujrat-based raw cotton and cotton yarn trader.

A standstill exists in the industry’s entire chain, starting from farm to the factory. While no raw material, especially cotton, purchases are happening, few ginning mills that clean and process cotton for use by yarn mills are functioning.

“There no new purchases in cotton. Any movement in cotton or yarn is very small,” said Popat.

Arrivals of cotton bales (170 kg each) have been sparse during the lockdown and growers could still be holding at least 80 lakh bales across the country.

“China is trying to take advantage of the Coronavirus situation by trying to buy raw cotton and yarn cheap,” said Popat, adding that Beijing was aiming to build reserves.

There are other problems, too, that various sectors face, particularly with regard to funding in the current situation.

“Banks are not helping us despite the Reserve Bank of India order on 27 March. Most of the banks are still to decide on the package they can offer to the textile mills,” says SIMA’s Selvaraju.

The industry is more concerned over the Ministry of Home Affairs order asking all industrial units to pay 100 per cent wages to workers.

Textile industry experts wonder why the industry should pay up for no fault of theirs.

“Labour law specifies that industrial units should pay 50 per cent of the salary in case of lay-off. Why isn’t the law taken into account when an order to pay 100 per cent salary is passed?” asks an industry official, not wishing to be identified.

“We at least need a waiver of Provide Fund and Employees State Insurance payments,” said SIMA’s Selvaraju.

Also, despite the announcement of lower interest, textile companies are still paying high interest ranging from 11 to 12 per cent.

“There is also no clarity on how non-performing assets would be considered in view of the changed circumstances,” said the SIMA official.

“The government should help us tide over the immediate fund crunch. Banks could be asked to raise the credit limit,” said AEPC’s Sakthivel.

Selvaraju said the Centre should announce a two-year moratorium on payments of textile units since they contribute to employment and economy in a major way.

Any delay in the industry’s loan payments should be considered as default only after six months or till normality is restored, say industry experts.

Despite these problems worrying it, the textiles industry is optimistic that it would be able to take advantage of the current backlash against China, which is being held responsible for the spread of Coronavirus in the European Union and the US.

D K Nair, a textile industry expert, said that if the overall eco-system in the industry is improved, India would be able to take advantage of the situation.

“Our productivity, turnaround time for meeting orders and scaling up production can help immensely,” said Nair.

“Taking advantage of the emerging situation especially against China depends on how we utilise the opportunities. Right now, we need some relaxation at least in rural areas,” said Sakthivel.

“Our exports can be increased to $100 billion levels with the existing capacity in the industry. We also have the people to accomplish the task. But we need to be competitive in the global market, which can be achieved by ensuring a level-playing field for the industry,” said Selvaraju.

“Our existing infrastructure is not satisfactory. We need to expand our facilities, which could take 4-6 months. We can certainly gain over China, which has a tough job to convince its buyers that it cannot be held responsible for the Coronavirus spread and tragedies,” said Popat.

As of now, the conservative estimate for the textile industry to become fully functional is three months from the time the national lockdown is relaxed or lifted.

Selvaraju said since experts are now pointing to Coronavirus peaking around June-end or July, any revival of the industry can happen around the year-end only.

“No doubt, there is some bitterness towards China. In a year or year-and-a-half, India should be ready to take on the Chinese, provided the right policies are in place,” added Popat.

(This is first among a series of five articles on the Indian textiles industry. The second one will be published on 1 May.)