As you know this industry is labour centric and the impact of this war would make for uncertainty on the job front…reports Arun Lakshman
Tiruppur Exporters Association (TEA) president Raja A. Shanmugham has said that the industry which is often referred to as the hosiery capital of South India and the Manchester of South is facing an acute crisis.
He said that the heavy increase in raw cotton prices had already affected the business and now the Russia-Ukraine war has taken the business to a new low.
Shanmugham, who is himself exporting to Europe, said that the market was slowly recovering from the Covid-19 crisis and they hope that the war will be over and prices of raw cotton will come down so that the industry gets back to normal providing employment to 6 lakh labourers and earning huge foreign exchange for the country.
The industry has a projected revenue of Rs 33,000 crore from the export business and Rs 32,000 crore from the domestic market with a total market cap of Rs 65,000 crore. He said that unless the government supports the exporting units and strictly monitors the raw cotton pricing, the industry will face the heat even after the war between Ukraine and Russia ends.In an interview, he expressed his concerns as well as expectations. Excerpts:
Tiruppur garment exports are facing the heat from the war in Ukraine. Please explain…
Yes we are facing the heat but still the full impact is yet to be felt and we have to face it. Right now the already lingering container problem has got further escalated creating problems in exporting our merchandise as there is a huge shortage of containers.
Moreover, all the European brands do have garment stores both in Russia and Ukraine, now closed due to economic sanctions. Most of the reputed international brands have outsourced their work in Tiruppur and this has led to our industry getting crippled. Two things have a direct impact, the lack of containers and the showrooms of major European brands in Russia and Ukraine being shut down.
Another issue that affects the market is the increase in fuel costs in Europe due to the war which has disrupted the spending power of the Europeans. The fuel prices have increased by 30 to 40 per cent after the war.
The prolonged war has created a fear factor among all, particularly in the European region. Everyone is praying for it not escalating any further.
More than this buying garments is getting relegated to the last option. This will severely affect the quantum of trade in the coming season.
Is the increase in cotton prices a reason for the hike in production cost?
Yes indeed. The increase in cotton prices is a major reason for the hike in production costs. Other than that almost all the input costs have increased to an unprecedented level and have led to a major hike in production costs.
An increase in production costs and major markets shutting down are the reasons for the slump in business in Tiruppur. You see the raw cotton import duty is presently 11 per cent and we want that to be totally removed. With the import duty, the traders are making umpteen excuses to hike the price which is affecting our cost.
The farmers would already have sold all their cotton to the traders and there is a large presence of multinational companies (MNCs) in the cotton trade industry, they are raising the prices under the guise of this import duty. We want the government to remove that for a level playing field.
When do you expect a revival of fortunes in the trade?
Even as every exporter or for that matter every industry expects a revival of fortunes at the earliest, one or the other external factors are cropping up on a regular basis affecting our business. As everyone knows, the market is dominated by external factors and unfortunately we are facing the brunt of these factors.
While the Covid-19 pandemic took away two precious years, the sudden development in Europe has had a cascading effect on our fortunes. Anyway, we are expecting an immediate end to these crises and hoping the Tiruppur export industry regains its old health and vibrancy and provides more and more employment to the workers, earning foreign exchange for our country and the industry itself becomes profitable. Being an optimist, I feel that the worse will pass and the industry will regain its vitality.
As the industry is reeling under the effect of the Ukraine war, how is it affecting the labourers?
As you know this industry is labour centric and the impact of this war would make for uncertainty on the job front. But as of now, we all survive with the available orders in spite of a lot of challenges. We have a strong labour strength and there are around 6 lakh labourers who are directly employed in the industry.
We have labourers from across the country and in fact it’s a Pan India mix. There are around 2.5 lakh North Indian labourers in our workforce and we provide them with all facilities including lodging and a decent salary. We believe that the strength of the labourers is our strength and we move forward in this manner.
How are you planning to overcome the crisis?
We have chalked out a plan for survival by confirming orders in a no-profit situation. This will lead to our stocked materials being sold out and also help the buyers as the retail markets are all shut. We believe that we have to survive as a team and overcome this situation and with that understanding, we are proceeding ahead.
Do you feel that this would lead to other competing countries like Bangladesh and Vietnam taking advantage of the situation?
This problem is for all the competitors too and we cannot say that one country is gaining advantage in this crisis. But our competitors do have other advantages like Foreign Trade Agreements (FTAs) through which they are constantly and continuously progressing faster than us.
The Covid-19 pandemic has taken a toll on all the industries and businesses and after a slow recovery will the new development make a major dent in your industry?
We wish that not to happen. Tiruppur has already passed through lots of challenges in its forward journey and as optimists we hope that this will also pass soon.
What would be the annual turnover of the Tiruppur garment industry?
A. We are expecting a turnover of Rs 33,000 crore from exports this financial year and another Rs 32,000 crore in the domestic market. Altogether, the total turnover this financial year that we expect is Rs 65,000 crore.