Thankfully, almost all the hurdles can be removed with appropriate policy tweaks. This would go a long way in India replacing China in the global textile market.
The Indian textile industry is on a strong footing to get a major share in the global export market. India is one of the largest producers of raw materials such as natural fibres - cotton and jute - as well as of synthetic fibres.
The Indian textile industry is hoping to take advantage of the current anti-China sentiments across the globe due to the novel Coronavirus spread (Covid-19 epidemic).
Developed nations such as the US and those of the European Union are holding Beijing responsible for the spread of the pandemic, alleging that it failed to alert the global community on the precarious situation in China.
“We are very strong on the cotton front. But we have issues with synthetic fibres. We need to address the issue since synthetics are expected to dominate the textile market,” said Dr K Selvaraju, Secretary-General, Southern India Textile Mills (SIMA).
SIMA is the representative organisation of the entire textile industry value chain link in south India.
According to the International Cotton Advisory Council, India overtook China as the largest cotton producer for the current 2019-20 season (July-June) accounting for a little over 23 per cent of the total 25.92 million tonnes (mt) output.
China with a production of 5.8 mt contributed 22.3 per cent of the world’s output with India’s being estimated at six mt. Last year, China’s production was 6.04 mt against India’s 5.35 mt.
Though India has climbed up the ladder in production, it has dropped on the export front. India is projected to export 9,00,000 tonnes this season against 800,000 tonnes last year.
This is, however, a welcome feature since it means that the domestic user industries are tapping the country’s potential as one of the largest cotton producers.
India is also the top jute producer with production hovering below two mt annually. Bangladesh, the second-largest producer is the largest exporter.
Again, jute fibre produced in the country is being utilised by the manufacturing industries for producing various products, primarily jute bags used for packing foodgrains and other agricultural commodities.
India is also the second-largest producer of man-made fibres - all derivatives of petroleum products. In particular, the country is second-largest producers of viscose and polyester with other fibres being polypropylene and acrylic.
According to the Indian Textile Ministry, man-made fibres production in the country is 1.4 billion kg. Thus, India enjoys a clear advantage over the rest of the world in terms of raw material availability.
Blessed with these advantages, the textile industry would want to forge ahead but faces problems.
“The Covid-19 situation has brought cotton trading to a halt. China is trying to get cotton and yarns of 30s count cheap. The Chinese are trying to build a reserve of cotton and yarn,” said Anand Popat, a Gujarat-based raw cotton and cotton yarn trader.
Currently, export quality cotton such as Shankar-6 variety is quoted around Rs 37,000 for a candy (356 kg).
“Cotton Corporation of India (CCI) is quoting Rs 44,000-46,000 a candy for cotton. But it is offering Rs 8,000-9,000 discount for the purchase of huge quantities of the old crop (2018-19 season). Prices are higher than market rates, though,” said Popat.
On the yarn front, China is seeking a 20 per cent cut in the prevailing market prices.
The global market is witnessing a bearish trend and any change, for now, is unlikely. In these circumstances, it is unlikely that Indian growers, traders or yarn manufacturers would want to explore export prospects, trade sources say.
The nation-wide lockdown has resulted in cotton trade coming to a total halt with arrivals being almost nil last month. This has resulted in growers left holding some 25-30 lakh bales (of 170 kg each) of raw cotton.
In addition, CCI is expected to be left with at least 100 lakh bales of raw cotton stocks with it. All these could result in cotton being available even until the new crop arrives in September-end or early October.
Cotton is planted in June and growers generally harvest thrice starting September and ending in January-March. The general trend is in view of low arrivals from April, cotton prices tend to rise until new arrivals.
This time, however, the stocks are expected to last until, at least, mid-August and prices are likely to rule easy. This, traders said, could help textile mills to produce yarn at a lower price.
However, CCI holding larges stocks could decide the price at which cotton could be offered in a couple of months from now. That could sometimes upset the industry's cart.
There are also problems in transporting cotton from States such as Gujarat to textile mills in south India particularly Tamil Nadu.
“China gets cotton at a cheaper freight rate than any of the mills in south India,” says Popat. This is since ships from China that bring machinery to India offer huge rebates to carry cotton to China. For them, something is better than returning empty.
“The issue regarding transportation is better than what it was before 2014 as the Government allowed transportation of cotton through ships. Still Chinese mills enjoy low transportation rates,” said SIMA’s Selvaraju.
On the other hand, Bangladesh, which has overtaken India in garment and apparel exports, depends on Indian cotton to a large extent.
India is one of the largest suppliers of raw cotton, cotton yarn and fabrics to Bangladesh. But the neighbouring country exports Chinese textile products to India under the free trade agreement, point out textile industry experts, to indicate how India had surrendered its advantages.
This could be overcome by policy tweaks, they said.
Selvaraju said the textile industry also suffered in States such as Tamil Nadu which demanded a one per cent market cess on sale of cotton stored by CCI in the State after transporting the fibre from growing areas.
On the synthetic fibre front, the Textile Ministry says that fibre consumption, which has witnessed a steady rise, is expected to increase sharply in the coming years.
India’s total per capita consumption of fibre is 5.5 kg per year, far lower than even Latin American and East European countries. The per capita consumption of man-made fibres is 3.1 kg which is lower than some of the African countries.
The Textile Ministry sees a huge opportunity in the per capita consumption rising but the industry points out problems such as taxation that are responsible for the situation.
“Import duty for synthetic fibre raw materials should be lowered. Higher duties are affecting the industry’s competitiveness,” says the SIMA Secretary-General.
The other issue is the imposition of anti-dumping duties on petro-products such as purified terephthalic acid (PTA). Though the anti-dumping duties were abolished in February this year, it had been causing problems until now.
The anti-dumping duties were imposed as producers such as Reliance had filed a petition with the anti-dumping authority claiming that their business was affected by PTA imports.
The producers had complained that the shipments were made at a price lower than what was prevailing in the countries from where the consignments came.
Industry sources said there are only two or three PTA producers in the country and India would have to look at the larger interests of providing a level-playing field to the industry, which had bright prospects.
The jute sector has found new uses and products in recent years and the US has emerged as the main market. Jute textiles, in particular, is witnessing the emergence of new products such as cotton blending, jute tarpaulins, carpets, and webbings.
But it faces a slew of problems such as fluctuating domestic production, obsolete machinery, high costs to modernise units, high man-machine ratio and labour issues.
Thus each of these raw material segments has problems that pose serious hurdles in the textiles industry taking advantage of the raw materials scenario.
Still, experts say these problems could be overcome by the textile industry, especially when it looks to take advantage of the anti-Chinese sentiments among the global community.
(This is the second in a series of five articles on the Indian textiles industry. The first one was published on 29 April. The third will be published on 4 May).