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CHAPTER IV
THE AHMEDABAD COTTON TEXTILE INDUSTRY
EVOLUTION AND DEVELOPMENT
Ahmedabad had been a prosperous town since the
except for the 17th and 18th Centuries when
hardships of invasion. In fact, the great Moghul
to borrow money from its ¢Sethias'. Up to the
15th Century,
it faced the
emperors used
mid-nineteenth
Century, Ahmedabad was famous for manufacture and export of
¢Kinkhab' and ¢Mashroo' cloth, an established centre of cloth
printing, as well as a trading centre of indigo and cotton fibre.
With the invention of synthetic dyes, the indigo trade gradually
died. The market for silk and brocade also gradually became
curtailed, and the merchants began exploring for new avenues of
business.
The advent of an ex-government servant na~ed Ranchhodlal Chotalal
on the scene in 1860 proved to be a catalyst for the
establishment of the cotton textile industry in Ahmedabad. The
machinery and equipment of this first mill in the city, a
spinning mill of 2500 spindles, was brought from Lancashire, and
the mill was opened in 1861. Other entrepreneurs followed suit, I
and by 1878 there were 4 mills. The jain and vaishnav banias who
had kept aloof from the industry for almost two decades now came
out of the conservative trading and money-lending operations and
started establishing mills. By 1900, there were 27 mills in the
city.
The textile mills in Ahmedabad were modeled on Lancashire. Even
the buildings were built in the style of Lancashire mills, multi
storied and windowed. The first managers, technicians and workers
were also brought from there, so that their methods and
organisations came to be exactly copied, irrespective of their
81
·-suitability or convenience for the country, climate or nature of
the people (Rice,l958);
The mills were promoted by 'Managing Agents' whereby an
individual, a group of individuals, or a private limited company
managed a business on behalf of its owners for a commission
either on turnover or profit. Large managing agencies in India
used to manage upto forty different business~s either as a single
agency or as a group of agencies all composed of the same
individuals.
agents, in
In a system peculiar to Ahmedabad,
a~dition to giving interest, also
the managing
shared their
commission with the public depositors to attract capital for
their ventures.
In Ahmedabad, unlike elsewhere, the managing agency agreements
were not subject to a time-limit and were "permanent and non
changeable". The commission was based on sales unlike other
centres where it was based on gross profits or production.
However when in any particular year the company earned less than
enough to pay. a dividend of 6%, the managing agents would forego
their commission upto a maximum of one-third. The Managing agents
at Ahmedabad also did not avail of ¢office allowance' unlike
Bombay and Calcutta. The managing agency system continued
successfully until it was abolished by the Government in 1966.
In the latter part of the Nineteenth Century, China was a major
market for Indian yarns and the Ahmedabad mills exported large
quantities of yarn, the balance being consumed by the handlooms
in Gujarat and Deccan. Some of the cloth-producing mills
manufactured -long-cloth and jeans, and later on coarse and medium
count dhotis for the farmers and poor classes.
The First World War provided considerable stimulus to the
industry and by 1921 there were 51 mills, of which 34 were
composite units. The purely spinning units had proved unviable
and had reduced from 17 in 1911 to 10. There were 7 purely
weaving units, of which none survived by 1944. They were either
closed down; or were converted into composite units. In 1923, one
82
of the mills started manufacturing fine and superfine fabrics and
some other mills followed suit. By 1941 many of the Ahmedabad .. mills specialised in fine count fabrics (Table 4.1) and imported
nearly half of their cotton consumption needs from Egypt. They
also diversified from gr~y to coloured and fancy fabrics. (Table
4.2)
TABLE 4.1
IMPROVEMENTS IN THE QUALITY OF FABRICS : 1921-1941
Centre
Bombay
Count
30/40s
above 40s
Ahmedabad 30/40s
above 40s
1921-22
% of Total prod.
1.7
0.3
6.5
0.9
1941-42
% of Total prod.
11.5
6.4
17.3
18.3
Source: Mehta, S.D., The Cott~n Textile Industry.
TABLE 4.2
IMPROVEMENTS IN PROCESSING OF FABRICS : 1921-1941
Centre
Bombay
Variety
Grey
Coloured
Ahmedabad Grey
Coloured
Source : Ibid.
1921-22
%
63.6
36.4
93.2
6.8
1941-42
%
71.8
28.2
66.6
33.4
83
The defense
unprecedented
requirements of World War II resulted in
rise in cloth prices and high profits for the
mills. However, though the profits made in World War I were
ploughed back towards the establishment of new mills and
expansion of the old ones, the high excess profit tax levied by
the British Government during World War II did not leave enough
reserves to rehabilitate the worn out machinery, the prices of
which had incFeased nearly four-fold. Other textile centres like
Baroda, ruled by erstwhile Maharajas, prospered as they were not
subject to this tax. Moreover, countries like Japan, ,Great
Britain and Germany were re-building their own textile
industries, resulting in a huge scarcity in the world textile
machinery markets. The cost of rehabilitating the Ahmedabad
mills was estimated at around Rs.700mn. by The Gujarat Textile
Reorganisation Committee in 1968. Another disadvantage of the
War period was that since prices and production were controlled
and almost any cloth could command a sale, both management and
workers sacrificed on quality. Later on, mills had to struggle to
reintroduce former standards of quality.
From several points of view, the cotton textile industry of
Ahmedabad reveals certain distinctive features. Though the hot,
dry climate of the city and its location in the middle of a wide,
dusty plain·made it unsuitable for the manufacture of textiles
(Rice, 1958), the abundance of raw cotton, labour and a large
consuming market for yarn textiles in and around Ahmedabad
combined with an entrepreneural class of traders of modest means
but great organising ability fulfilled the rest of the conditions
for its rapid development. This is in direct contrast to the
Bombay mills which were promoted mostly by successful
industrialists, many of whom had prospered greatly from the
Am e r i can C i v i 1 W a r ( 18 61 t o 18 G 5 ) by ex port in g cot ton t o 13 t· i to i n .
In Bombay, the industry was organised for the export trade in
yarn and later on grey fabrics, while the Ahmedabad industry was
started primarily to take advantage of the large supplies of raw
cotton
Bombay
the
and the fabric-consuming markets around it.
mills have been, on the whole, much larger in
Ahmedabad mills. Another important factor
Hence
size
that
the
than
has
84
considerably influenced the size of mills in Ahmedabad has been
the initial promotion and financing. Though the units were
formally joint stock in nature, in reality they were largely
proprietary in character since the funds had been subscribed
largely by the promoters who were managing agents. The public
subscription of shares was minimal but they came in as depositors
of funds with the managing agents. This can be seen from table
4.3.
TABLE 4.3
MAJOR SOURCES OF CAPITAL FOR THE MILLS
( Mn .Rs.)
-----------------------------------------------------------------'
;
BOMBAY
1930
AHMEDABAD
1930
---------~-------------------------------------------------------
No. of mills
Loans by:managing agents
Public Deposits
64
53.20
27.30
64
26.40
42.60 I -----------------------------------------------------------------
Source : Ibid.
Though the size of the units was small and the production
consisted of coarse and medium count yarns from indigenous cotton
to begin with, most of them expanded their capacity gradually and
diversified into composite units. The Ahmedabad mills a1so
switched over to finer counts much earlier than did their Bombay
counterparts and produced more fancy fabrics using Egyptian
cottons. (Table 4.1) The Swadeshi movement initiated by Gandhiji
discouraged the sales of British fabrics and gave a fillip to
the change-over. The Tariff Board of 1927 recommended
diversification of the product-mix and the new mills were
equipped with specialised machines for spinning and weaving finer
counts. Not only this, they were also equipped with substantial
processing machinery and produced more processed cloth (Table
85
4.2). Within a short span of two decades 1911 to 1931, the number
of purely spinning units declined from 17 to 6, either due to
liquidation or diversification to include weaving machinery.
Between 1931 to 1935, 6 weaving units were scrapped or went into
liquidation, so that by 1944, there were 61 composite and 5
spinning mills in the city (Mehta, 1949).
Less than 18 prominent families controlled and managed more than
4/5 of the total units as managing agents, prominent amongst
them being the Kasturbhai Lalbhai Group (7 mills), the Chamanlal
Parekh Group (7 mills), and the Motilal Hirabhai Group (5 mills)
(Mehta, 1949). This phenomenon resulted in centralised control
and economies for these mills in the finance, purchase and
marketing functions.
The partition of the country in 1947 adversely affected the
Ahmedabad textile industry. Superior qualities of cottons which
were needed. for the varieties produced by the Ahmedabad mills
were grown in the rain-fed tracks which went to form West
Pakistan and became unavailable (Table 4.4). Moreover, the
Ahmedabad mills also lost a huge market to which it had specially
catered in terms of special varieties.
86
TABLE 4.4
THE EFFECTS OF PARTITION ON COTTON PRODUCTION IN INDIA
1946-47
(Pre-Partition)
1947-48
(Post-Partition)
Area
( •ooo Acres)
14,860
10,655
Production
(•ooo Bales)
3,566
2,188
No. of
Textile Mills
423
409
Source :Kulkarni, V.B. (1979), History of the Indian Cotton
Textile Industry, Bombay.
Between 1947 and 1951 when planned industrial development was
initiated, Gujarat was considered a surplus region and expansion
of existing units was not permitted. (Gujarat, Govt. of, 1968.)
In the initial periods, scarcity of cloth due to a short supply
of cotton brought additional advantages for some mills, but on
the whole, the Ahmedabad mills suffered during the readjustment
period. The government of India enacted the Cotton Textile
(control) Order in 1948, under the parent provisions of the·
Essential Supplies (Temporary Powers) Act, 1946. The provisions
of the 1948 Order gave the government wide powers to exercise
control over the textile industry. Production and price controls
were introduced and in 1950, another notification reserved
certain types of dhotis, sarees, lungis, bed-sheets, chaddars,
bed-covers, plain weave coarse cloth and towels for the handloom
sector. An· Ordinance in 1949, and later its replacement The
Cotton Control Order, 1949, vested in the Central Government wide
powers to regulate the prices, supply, distribution, transport,
trade, etc. in cotton. These were followed by other controls
throughout the Plans.
87
Maha Gujarat was formed in 1956, and The Indian Cotton 1 Mills
Federation in 1957, a critical year for the textile industry. The
subsequent years are characte~ised by severe ups and downs for
the industry. In addition to the general complaints of demand
recessions, inflationary pressures which resulted in increased
costs of production, shortage of finance, controlled cloth
obligations, increasingly heavy excise duties, irregular cotton
supply at high prices, unavailability of indigenous machinery and
severe restrjctions on the industry, the Ahmedabad cotton textile
industry had to contend with severe coal and power shortages,
comparatively higher octroi and sales taxes and later on even
water shortages in summer. Modernisation was very difficult. The
indigenous producers could not meet the demand even though their
range
import
Above
was limited, obsolete and of inferior quality. There
restrictions
all, there
on machinery and custom duties
was severe shortage of finance
were
due to
were
high.
RBI
controls on long and short-term credit. The Reserve Bank of India
even restricted mills from accepting public deposits in excess of
25% of paid-up capital and free reserves. Increased borrowings
raised interest costs of mills by 3 times in 6 years from 1961-
1967(ATMA, 1968).
While wages kept on increasing, there was no commensurate
increase in production or productivity. The report of the Indian
Embassy in France in 1963 exploded the myth of lower Indian
labour costs. "In spinning, on 20s to 30s counts, the average of
workers employed in Europe per 100 spindles has been worked out
to 1.8 as against 10.7 in India. In weaving, per 100 looms, the
comparative average figures for workers work out to 15.0 and 70.1
respectively."(Kulkarni, 1979). The competition from powerlooms,
initially mainly in fine and superfine varieties which attracted
heavy excise duties, was severe. Average excise duty paid by
powerlooms was only 5.0 paise per yard compared to 30.5 paise
paid by the organised sector. In the export markets, chief
competitors for the varieties offered were Pakistan, China and
HongKong. In fact, HongKong only re-exported textiles and could
still compete successfully given our high prices, narrow product
mix and low quality. In 1964, the average price realisation per
88
metre of India's exported cloth was as low as 99 paise (Kulkarni,
1979) .
The rupee was devalued in June 1966 and The National Textile I
Corp6ration was set up in 1968, when almost 76 mills in India
were closed. In 1960, only 2 Ahmedabad mills had made losses. By.
1965, 26 mills were making losses. The 1960s were described by
The Hindu as "ten agonising years of unprecedented stress and
strain and uncertainty in almost all spheres of activity. The
decade has witnessed the death in harness of a President and two
Prime Ministers, three military invasions, two severe droughts,
devaluation of·currency, unrest in field, factory and school and
violence and turmoil in many parts of the country."
In the 1970s, the picture was no different. Rising prices,
tariffs and wage costs, severe credit squeeze and controlled
cloth obligations coupled with low offtake and stiff competition
from powerlooms resulted in more mill closures. The excise duty
structure discouraged the mills from producing fine and superfine
varieties for which duties were 43p and 64p (grey) respectively
as against l8p for higher-medium varieties. According to ATMA,
between 1970-1975, the gross block of the Ahmedabad textile
industry increased by Rs.930mn. to Rs.2590mn. 1975-76 was one of
the worst years for the textile induscry. In Ahmedabad alone, 30
mills for which figures are available made a net loss of more
than Rs.l70mn. The government announced the multi-fibre policy .in
1976, making the use of man-made fibres compulsory in the fibre-
mix to
hybrid
overcome the recurring cotton shortages and some
cotton varieties were developed. IDBI announced the
good
Soft
Loan Scheme for modernisation. However, response of the mills was
initially poor. After some modifications, by 1979, a bumper year
for t h e t ex t i l e in d u s t r y , 2 4 m i 11 s h ad a p p 1 i e d f o t· 1 o .:1 n s
amounting to Rs.490mn.
For the Ahmedabad industry, the coal and power shortages and
their high rates were an additional burden. Mills in some years
had to purchase coal at premiums of up to Rs.200/tonne. The unit
cost of power in Ahmedabad, the highest in the country, was 50.6p
89
in 1980. In Ahmedabad, coal and power costs as percentage of
production costs increased from 3.8% to 10.0% in 5 year~. In 1980
alone, loss of output due to power cut was estimated at 95mn.
mts. in additi6n to lay-off wages. 37 mills in Ahmedabad
installed 100 DG sets to overcome the power problem. By 1990, the
cost of power rose to Rs.l.5 per unit. With the addition of 20%
electricity duty and 4% sales tax on electricity, they were the
highest in the country.
Locational Cost Disadvantages of the Ahmedabad Mills
Until very recent times, textiles and its ancillary industries
were the only predominant organised industries in Ahmedabad. As a
result, some of the levies were focused by the Municipal I
Corporation primarily on the textile industry as a major source
of revenue since its collection was much easier from an organised
industry. The difficulties in the availability of coal, its high
prices and its low quality has plagued the Ahmedabad industry
since many years. Mills have been forced to pay high premiums on
very low quality coal. The high costs of power and almost
continuous
recurring
agitations.
power cuts for the industry have also been
ob~tacle and so have the nav-nirman and
Table 4.5 brings out the overall impact
another
communal
of cost
disadvantages from four major factors - sales tax, octroi, power
and wages - on the Ahmedabad textile industry as compared to the
textile industries in six other States of India computed for an
average mill of 25,000 spindles and 500 looms in 1987.
90
Element
of Cost
Sales/
purcha1.se tax
TABLE 4.5
COST DISADVANTAGES TO THE AHMEDABAD MILLS (1987)
(Thousand Rs.)
Annual Savings in Cost if unit were located in
Tamil-Nadu Maharashtra M.P. Haryana Punjab Kerala
( 9) 48 276 48 108 ....:
Octroi':;' excise/
entry tax 324 288 792 24 1512
Power I
Wages
Total
Note
4668 2208 5052 3504 5448
(57) (1512) 3468 15768 13344
- - - - - - - - - - - - - - - - - - - - -4926 1032 9588 19344 20412
: Figures in parenthesis indicate comparative
advantage to a mill located in Ahmedabad.
324
8040
1332
- - - -
9669
cost
Figures based on an average mill of 500 looms and 25000
spindles.
Source : Prafull Anubhai, Sickness in Indian Textile Industry
Causes and Remedies, Economic and Political Weekly,
Nov.26, 1988.
The textile sickness became endemic and in 1985 the government
came out with the New Textile Policy. The state government also
introduced a "package of assistance" to help out 34 sick mills by
way of offering moratoriums, exemptions and soft loans and
guarantees of Rs.704mn. on their behalf. ~he year 1982 had seen
the longest and biggest strike in the world when the Bombay mills
were closed for 18 months. The powerlooms benefited immensely
from the strike, and built up a regular steady clientele. The
share of the organised sector of the textile industry in total
91
cloth productio~ was reduced from 47.5% in 1970 to 38.4% 1n 1980,
27.4% in 1985, ~nd 19.9% in 1990.
While the security price index of ordinary shares (1980-81=100)
of all industries increased to 136 in 1984-85, that for cotton
textile industry decreased to 86.7, reflecting the loss of
confidence of investors. Fixed deposits from investors also
decreased and the trade credit period also kept on increasing as
traders encountered resistance to mill-made fabrics from
consumers. By 1990, out of 63 composite units in Ahmedabad, only
27 private, 7 NTC and 7 GSTC units were running. Sixteen private
and 6 GSTC units were closed. Three out of the four spinning
mills were also lying closed. Even out of the 27 priva~e working
mills, 12 mills were already under the purview of the Board. for
Industrial and Financial Reconstruction (BIFR) and subsisting on
government loans under the Sick Industrial Companies (special
provisions)' Act, 1985. Most of the statistics in this and the
following section have been obtained from ATMA ~The Ahmedabad
Textile Mills Association).
.. PRESENT PROFILE
The Ahmedabad cotton textile industry consists of 63 composite
mill units and 4 spinning units. In 1990, 22 private sector
composite units and 1 units under GSTC were lying closed, and 12
of the remaining mills had been declared sick and referred to the
Board of Industrial and Financial Reconstruction (BIFR). This was
the highest since 1976 when 39 mills were lying closed in
Ahmedabad. Table 4.6 shows a general profile of the Ahmedabad
composite mills. There were 2.5mn installed spindles 1n 1975
which increased by 2.9% to 2.6mn in 1980 and were reduced to
2.0mn in 1985 due to mill closures. The total installed loomaae
increased by only 2.1% from 1975 to 1980 and decreased by 25.5%
by 1985 both due to mill closures and because ordinary looms were
replaced by the more productive automatic looms in some mills.
Thus automatic looms increased by 13.7% in the decade 19~5-1985
while total installed loomage decreased by 23.9%.
92
Fibre Consumption
Table 4.7 shows the raw material consumption of the Ahmedabad
mills. In 1975, the consumption of man-made fibres was negligible
and data is not available. By 1980, the mills consumed 88.6%
cotton fibre and 11.4% man-made fibre (MMF). This may be
attributed to the Multi Fibre Policy (1976) which made the use of
10% MMF compulsory as well as a response to changing consumer
behaviour, which shifted towards non-cottons and blends. By 1985,
the industry•s consumption of raw cotton formed only 84.4% of the
total, and. the consumption of filament yarns, especially
polyester, increased to 6.7% of the total consumption. Actual
consumption of fibres decreased due to decreasing production of
existing mills and closure of many mills.
Yarn Production
Yarn production of the Ahmedabad mills, including captive
consumption, civil deliveries and exports was ll8mn kgs in 1975,
132mn kgs in 1980 and 79.5mn kgs in 1985. Table 4.8 ·shows ~n
detail percentages of count-wise productions of cotton, non
cotton and mixed/blended yarns. Exports of yarn from Ahmedabad
were negligible and have only been attempted since 1989-90. It is
clear that the industry has been heavily concentrating on the
medium counts of 2ls to 40s for its cotton yarns. 81% to 86% of
its cotton yarn production has been accounted for by these medium
counts through the years. For the non-cotton and blended/mixed
yarns, the average counts bave been slightly finer, between 3ls
to 60s. By 1985, the MMF yarns became still finer, and more than
75% were accounted for by the fine and superfine 4ls to 80s
counts.
Initially, the Ahmedabad mills were not oriented towards yarn
sales. Civil deliveries accounted for only 6.1% of the total yarn
production. This may be attributed to the fact that most of the
mills were well balanced, so that all the yarn produced was
needed for captive consumption on its own looms. Some adjustments
that were needed due to quality changes were made through running
93
or stopping extra shifts. With increasing modernisation and the
consequent increase in machine speeds, the equation changed, and
there was often yarn to spare for selling. Initially, it was
compulsory
its yarn
for the mills to produce a stipulated percentage of
sales in hank form for the decentralised handloom
sector. In times of acute recession, some mills also resorted to
yarn sales as a way to meet their most urgent working capital
requirements. As the decentralised sector continued expanditlg
rapidly, yarn sales became more remunerative. Exports were
restricted by the government to assure provision of adequate yarn
for the decentralised sector, and after 1986 only allowed with a
ceiling of 40mn Kgs in certain years of low raw cotton
availability except for exports against the Advance Licensing
Scheme.
Cloth Production
The overall trend in cloth production of the Ahmedabad mills from
1975 to 1985. has been a drastic reduction in meterage from
1015mn. mts. in 1975 to 799mn. mts. in 1980 and to 597mn. mts. 1n
1985 due to mill closures coupled with increasing productions of
blended/mixed varieties (Table 4.9). Until 1980, the Ahmedabad
textile mill .industry accounted for one-fourth of the All-India
mill production of cloth. By 1985, it was reduced to 17.5% of the
total production (In 1985, there were 15 closed mills accounting
for 26.2% of the installed spindleage and 29.4% of the installed
loomage). Many of the Ahmedabad mills had started switching over
to blended/mixed varieties after 1976. The Ahmedabad mills have
been producing blended/mixed varieties of textiles in much larger
quantities and earlier than the All-India mills. By 1985, the
Ahmedabad mills were producing 35.5% of the total blended/mixed
cloth produced by the organised sector.
Table 4.10 gives the percentages of count-wise cotton cloth
production and exports by the Ahmedabad and Bombay mills. More
than three-fourths of the cotton cloth production of the
Ahmedabad mills is accounted for by higher-medium fabrics, and
fine and superfine varieties accounted for another 15%. While
94
most of the production and exports of the Ahmedabad mills are
concentrated in the medium categories, the Bombay mills are more
diversified. Th€ir exports have also been much higher than their
Ahmedabad counterparts. In 1980, the Bombay mills exported 28.8%
of their total cloth production whi}e the Ahmedabad mills only
2.8% (ITB, 1980). The exports of the Ahmedabad mills have been
discussed in detail in the section on marketing in this chapt~r
under product policy.
The extreme dependence of the Ahmedabad industry on a few
varieties is also brought out in Table 4.11, which shows that
poplins, pattas and shirtings together account for 81% and 83% of
the total wearable varieties produced by the Ahmedabad mills,
making them more vulnerable to changing demands, the only
redeeming factor being that these are staple medium-priced
varieties which enjoy a year-round demand. As we shall see later
on, these varieties were increasingly being taken over by the
powerloom sector which offered stiff competition in terms of
prices. In the absence of substantial exports, the production of
blended fabrics was taken up as a survival strategy by many of
the mills. The Bombay mills show a much more diversified mix in
terms of fineness as well as varieties of fabrics produced, both
wearable and non-wearable.
Data on state-wise and city-wise production of blended and '
cotton cloth is very limited, and is available only
blended/mixed cloth production in 1980 (Table 4.12). Here
non-
for
again, I
the Bombay mills are more diversified in their product-mix. In
Ahmedabad, while 65% of the production of these varieties is
accounted for by polyester-cotton and polyester-viscose-cotton
blends, and another 21% by cotton-viscose and modified viscose
blends, the diversity of production of the Bombay mills lS
again evident in this table .
. The Ahmedabad mills have been producing less grey cloth and
processing more and more through the years as can be seen in
Table 4.13. There has been a substantial increase in bleaching,
95
dyeing, mercerising, pre-shrinking etc. of fabrics, increasing
their value. The percentage of bleached fabrics increased from
52.2% in 1975 to 80.3% of the total cloth produ~tion in 1985,
mercerised fabrics from 24.6% to 62.6% and pre-shrunk fabrics
from 13.2% to 46.8% of the total pro~uction in the same period.
96
TABLE 4.6 PROFILE OF AHMEDABAD COMPOSITE MILLS
-------------------------------------Year Installed Spindle Installed LOOII Auto t X Auto
Spindles Utilisation Loo111S Utilisation Looms Looms -------------------
1975 2527011 77Y. 46673 79X 7953 17.0% 1980 2600373 82Y. 47638 91X 9046 19.0% 1985 Surviving Mills 2022972 NA 35510 NA 9045 25.5Y.
Non-surviving Mills 717084 NA 14754 NA 919 6.2X
Total 2740056 63Y. 50264 76Y. 9964 19.8Y.
------------------------------------------------------Note : * 10 of the 15 non-surviving mills and 8 of the 48 surviving mills in
1985 did not have any automatic looms.
Source : il Mill Statement, Bombay Millowners' Association, various issues. iil Ahmedabad Textile Mills Association IATMA) Annual Statistical
Bulletin, various issues.
97
TA!l.E 4.7 RAW WITERIAL CONSIJ'PTI~ BY TIE fH£DABAD KIU.S
( '()( les/Kgs)
AAW COTION STIR£ FIBRE .FII..JKMT ~
Iooian Foreign · Total Viscose· l1od. vis. Polyester Others Total Viscose Polyester Polyaaide Cupra. thers Total TOTAL
19751 Bales 739 7 71t6 Kgs. 125630 1190 126820 NA NA NA NA NA NA ~ NA
19801 Bales 814 815 Kgs. 138380 ~~0 138550 3645 1014 5891 3246 13796 120 3842 33 0 09 4104 156450
188.6) (8.8) (2.6) (100.0)
1985+ Bales 493 0 493 Kgs. 83810 0 83810 1185 729 6397 561 8872 67 60 171 13 6610 99292
(84.4) (8.9) (6.7) (100.0)
Note : il Responding Hills : 1975:55 mills, 1980:63 mills, 1985:45 mills, chiefly due to mill closures, iil Figures in parantheses indicate percentages to total consumption.
Source : AlMA Annual Bulletins, Various issues.
TABLE 4.8 YARN PRODUCTION IN n£ ~DABAD MILLS
(Percent)
------------------------------------------ -------------TOTAL l'ln. Kgs. 1s-10st 11s-c0st c1s-30st 31s-40st 41s-b0st 61s-80s*Above80st Total
------------------------------------------- -------1975 COTTON Production 118.0 2.1 8.2 43.1 39.0 5.4 1.0 1.2 100.0 Civil Del. 7.2 5.1 19.3 54.7 13.3 3.8 .1.5 2.3 100.0 Exports 0.0 0.0 0.0 o.o 0.0 0.0 0.0 0.0 0.0
1980 COTTON Production 110.6 1.5 7.4 51.8 34.4 1.9 2.1 0.9 100.0 Civil Del. 16.2 2.8 8.6 72..7 13.7 1.1 0.5 0.7 100.0 Exports 0.1 0.0 3.9 2.2 76.7 17.1 0.0 0.0 100.0
1980 NON-COTTON Production 0.1 0.0 15.4 8.4 24.4 36.5 13.8 1.6 100.0 Civil Del. 0.1 1.8 0.0 26.0 8.9 54.7 8.6 0.0 100.0 Exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1980 BLENDED/MIXED Production 21.0' 0.0 0.1 12.0 36.8 38.7 7.0 0.6 100.0 Civil Del. 0.8 0.0 0.0 64.5 18.6 13.2 3.7 0.0 100.0 Exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1985 COTTON Production 64.4 2.6 6.9 44.6 36.5 6.3 2.1 0.9 100.0 Civil Del. 19.6 5.2 4.7 63.4 23.3 3.3 0.1 neg 100.0 Exports neg. 0.0 0.0 100.0 0.0 0.0 0.0 0.0 o.o
1985 NON-COTTON Production 0.1 0.0 15.9 3.7 neg 34.6 43.0 1.9 100.0 Civil Del. 0.1 NA NA NA NA NA NA NA NA Exports o.o 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
1985 BLENDED/MIXED Production 15.1 0.0 0.6 4.2 11.3 69.4 14.2 0.3 100.0 Civil Del. 0.8 NA NA NA NA NA NA NA NA Exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ---------------------Note : Civil Del. : Civil Deliveries
* The lower the number of the count, the coarser the yarn and the higher the number, finer the yarn.
Source : ATMA. Annual Bulletins, vairous issues.
99
TABLE 4.9 CLOTH PRODOCTIOO IN Tf£ AH'IEDABAD MILLS
<Percent I ------
TOTAL Coarse l'led iu11 Mediu11 Fine Superfine Fents Total (Lower) !Higher)
Mn. Kgs. X X X X X X X
1975 COTTON Production 965.0 0.1 7.3 75.8 12.1 4.0 NA 100.0 Civil Del. 903.4 0.5 6.4 71.2 9.6 3.1 NA 100.0 Exports 51.5 2.1 16.9 61.2 8.1 4.5 NA 100.0
NON-COTTON Production 5.8 NA NA NA NA NA NA
BLENDED/MIXED Production 30.1, NA NA NA NA NA NA NA
1980 COTTON Production 796.3 1.5 6.8 85.8 1.0 4.9 NA 100.0 Civil Del. 785.2 1.2 5.8 78.0 0.9 4.1 NA 100.0 Exports 22.1 33.8 15.2 49.1 0.7 0.6 NA 100.0
NON-cOTTON Production 5.6 NA NA NA NA NA NA NA Civil Del. 5.2 NA NA NA NA NA NA NA Exports 0.4 NA NA NA NA NA NA NA
BLENDED/MIXED Production 251.0 NA NA NA NA NA NA NA Civi 1 Del. 204.1 NA NA NA NA NA NA NA Exports neg. NA NA NA NA NA NA NA
1985 COTTON Production 333.6 1.3 3.7 79.6 10.3 5.1 NA 100.0 Civil Del. 288.1" 1.3 1.3 76.1 4.6 7.5 NA 100.0 Exports 19.6 13.5 2.9 67.4 7.2 8.9 NA 100.0
NON-cDTTON Production 2.2 NA NA NA NA NA NA NA Civil Del. NA NA NA NA NA NA NA NA Exports ·NA NA NA NA NA NA NA NA
BLENDED/MIXED Production 260.7 NA NA NA NA NA NA NA Civil Del. NA NA NA NA NA NA NA NA Exports NA NA NA NA NA NA NA NA ---------Note : Civil Del. : Civil Deliveries Source . Ahmedabad Textile Mills Association IATMAl. Annual Bulletins, various .
issues.
10 0
TAKE 4.10 COTTO\l QOTI-1 Ff\ODLCTI 0\l PND EXFffiTS
m1:::DABAD PND E01PAY MILLS
?H"EDABAD F~-oduc t ion 197.3
.1980 1985
E:·:po1··ts 1. 97~ .. "i 1980 19\:B
E01BAY F=~-cx:luc t ion 1.9/"'5
1980 1985
1975 1980 1985
1 .0 1.4 1.3
3.8 31.2 13.4.
13.3 1t+.4 ~
22.8 19.4 ~
7.1 6.2 3.7
13.8 15.0 10.0
23.2 22.7 ~
41.2 42.7 ~
Medium <Highed
Y.
75.5 86.7 79.6
73.8 49.7
67 ·'+
41.7 51.8 ~
16.5 3:).8
f\Y-:1
< F'el-centages >
12.0 1.1
10.3
14.'+ 2.3 5.8
6.0 4 .Lj.
NC!
0.8 1.9 N~
Lj .• (l
4.6 5.1
7.2 1.6 8.9
15.8 6.8 ~
18.6 5.0 ~
Sc:urce : i> Irdian Te:·:tile R.tlletin, Anr-Ltall\l~trbel-, 1975, 1980. ii) ATI1~, Anl"""Ltal B..tlletin, 1985.
., .. '·,-.
--~·
~... ",-.·.,
101
0 :v
TABlE 4.11 VARIETY-\.IISE COTTON CLOTH CIVIL ~TIOO lF ll£ M'EDABAD 1\'ID EOtlAY ~
----------- --------------- ---------------------------Year L'tloties Sarees ltJlls, Langeloth Langeloth Shirtings ea.bric, Gaberdines, Denias Suting,FlaJl
voiles,etc. etc. etc. etc. etc. drills, etc. X X X X X X X X X X X
------AHMEDABAD Production 1975 3.5 0.3 1.3 61.7 " "" 21.3 2.6 2.1 0.0 0.3 ne· -"·C:
1980 1.6 1.2 0.8 66.5 2.2 14.6 7.4 0.6 0.6 3.0 ne 1985 NA ~;A NA NA NA NA NA NA NA NA NJ
Exports 1975 NA NA NA NA M NA NA NA NA NA Ni 1980 1.1 0.8 0.6 42.9 40.2 2.0 2.0 7.7 0.0 2.3 0. 1985 NA NA NA NA M NA NA NA NA NA HI
BOMBAY Production 1975 5.0 1.1 7.6 31.3 24.9 8.7 8.3 8.1 0.0 1.0 0.
1980 4.7 2.6 4.2 30.6 27.5 8.8 9.2 6.5 0.2 1.5 0. 1985 NA NA NA NA NA NA NA NA NA NA m
E:<ports 1975 NA NA NA NA M NA NA NA NA NA ~ 1980 0.8 neg 2.2 16.4 48.3 1.4 7.5 7.0 neg 9.5 4. 1985 NA NA .NA NA NA NA NA NA NA NA Nf:
--------------Source : Indian Text:le Bulletin, 1975 1980.
ATMA. Annual Bulletin, 1985.
(Percentages of total wearablesl ----
fusuti Other Total Non- ~
Dedsuti Wearables Wearables Wearables TOTrt. X X ooctlts. 0001ts. oocms.
t), 7 2.0 990335 24540 101~75
.).3 1.2 785978 12610 79823 ~ 1..1 NA NA M
~ ~ NA NA N.i 0.0 0.3 8529 14020 ,..,....C''"' cC: ... "'1'7
NA ~ NA NA ~
1.4 1.8 140980 96236 137216 1.7 1.8 704371 55594 759'165 ~ NA NA NA NA
M NA NA NA ~ 1.8 0.3 160697 48637 21:3:~
~ NA NA NA NA
TABLE 4.12 AHMEDABAD AND BOMBAY HILLS : BLENDED/MIXED CLOTH PRODOCTIOO. (19801
-------canoN WITH Pa..YESTER WITH On£R TO TilL
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - BLENDS Viscose 11od.Visc. Polyester Others Viscose Woo 1 Others PVC
% X X " X " X X X X ------------------~--------------A'BAD 11 10 45 9 2 neg 21 2 100
B'BAY 16 16 15 4 19 0 7 19 3 100 ----------------------------------------------------------------------------------------Nate : Mod. Vise. : 'Nodi f ied Viscose fabrics
PVC : Polyester/Viscose/Cotton blended fabrics A'BAD : Ahmedabad B'BAY : Bombay
Source : Indian Textile Bulletin, Annual Number, 1980.
TABLE 4.13 CLOTH PROCESSING IN THE Al-tiEDABAD MILlS
(Mn. Hts.l ------------
Bleaching Piece Printing Mercer ising Pre- Other Total Dyeing Shrinking Processes Production
1975 523 444 404 246 132 35 1001 Y. (52.2) (44.4) (40.4) (24.6) (13.2) (3.5)
1980 753 509 401 428 214 61 1053 Y. (71.5) (48.4) (38.0) (40.6) (20.4) (5.8)
1985 479 335 184 373 279 54 597 Y. (80.3) (56.2) (30.8) (62.6) (46.8) (9.11
------------------------------------------------------------------------------------------Note :• Figures in Parantheses indicate percentages to total production.
.. Total percentages exceed 100% as some of the cloth undergoes multiple processing.
Source: Ahmedabad T~xtile Mills Association (ATMAl. Annual Bulletins, various issues.
104
MODERNISATION IN THE AHMEDABAD MILLS
The composite mills of Ahmedabad augmented their Spinning,
Weaving, Processing, Engineering and other machinery through the
decade under observation. This included expansion of capacity,
renovation, replacement as well as absorption of superior
technology. Unfortunately, the census of textile machinery was
conducted only from 1977 to 1980, and the data on expenditure
incurred by the mills on machinery is available only from 1975 to
1980. In the absence of official data, much of the .·following
section has been based on perso~al interviews with mill
managements and technical personnel.
Table 4.14 gives the percent share of superior machinery in the
Ahmedabad composite mills. It can be easily seen that some
processes have received more preferential treatment compared to
others e.g. the ring-frames, cards, speed-fames, spooling/winding
and sizing machines have undergone a rapid change/conversion to
superior types of machinery. This has been mainly due to ~he fact
that capital expenditure in these priority areas have yielded
faster returns in terms of productivity and/or quality, a lmajor
concern under circumstances of scarce and costly capital.
Moreover, it can also be seen from the table that the new
additions have not necessarily been confined to superior or
automatic machinery. The mills have also continued purchasing
conventional machinery like pirn-winders, cone/cheese winders,
ordinary looms, blow room lines and draw-frames. These decisions
have been dictated by the individual mill's, product-mix and
since 75-85% of the total cotton cloth production of the
Ahmedabad mills over the decade has been Medium-A (Higher Medium)
varieties as we have seen earlier, the acquisition of ultra
superior machinery was confined only to the few mills which
produced the fine and superfine varieties with cotton and blended
fibres.
105
TABLE 4.14
PERCENT SHARE OF AUTOMATIC MACHINERY IN THE
AHMEDABAD COMPOSITE MILLS. (1970 - 1980)
(Percentages)
-------------------------------------------------------.----------1970 1975 1980
Spinning
1. Blow-room lines 55.3 57.4 70.2 **
2 • Cards 16.6 41.1 86.9
3 • Combers 39 .. 6 46.0 48.3
4. Draw-frames 12.0 21 .. 6 ** 37.2
5. Speed-frames 11.2 41.1 66.9
6. Ring-frames NA NA 93.5 *
Weaving
1. Spooling/Winding 49.6 46.6 ** 100.0
2. Pirn winding 71.7 51.5 ** 44.2 **
3. Warping 16.8 17.3 22.6
4. Sizing 22.3 43.4 61.5
5. Looms 16.0 16.8 ** 20.5
-----------------------------------------------------------------* **
Includes ringframes converted to "top-arm" type spindles.
Accompanied by an increase in conventional machinery also.
Source : Indian Textile Bulletin, Annual Census of Machinery,
Various issues.
Since the Bombay mills have traditionally had a much more
diversified
possessed
mills 1n
product-mix than the Ahmedabad
more superior machinery in 1975
certain areas. Between 1975-1980,
mills,
than
for
they already
the Ahm~dabad
which data is
available, they spent 21% more on modernisation than the
Ahmedabad mills. The department-wise expenditure on machinery by
106
the Ahmedabad, Bombay and All-India mills
modernisation/rehabilitation for 1975-1980
presented in Table 3.4. While the Ahmedabad
expansion and 65% on modernisation, the
on
has
mills
Bombay
expansion and
already been
spent 36% on
mills (Mill
Statement, 1980) did not need much expansion. As we have already
seen, the Ahmedabad mills have been smaller in size than the
Bombay mills and have expanded gradually. Even today, the average
size of the Ahmedabad mills is smaller than their Bombay
counterparts. Expenditure on modernisation picked up after 1978
due to many factors, most important of them being the prosperous
period for ~extiles 1978- 1980, the availability of 'cheaper
funds for modernisation and the multi-fibre policy which allowed
the mills to diversify their product-mix into blended~mixed
varieties, though they have been woefully inadequate.
Based on inferences from ~epartment-wise expenditure on
modernisation for the four years 1977 - 1980 given in table 3.4,
the Ahmedabad mills initially concentrated on the processing and
spinning machinery. In the processing departments, amounts were
spent on renovation, replacement and expansion of capacity. The
new machinery acquired was both of the conventional as well as
the superio~ type, depending on the specific needs of the
product-mix.
modernisation
expansion was
Spinning also received attention, more
then in expansion. Next came
murginal but, some amount
weaving
was spent
in
where
on
modernisation and rehabilitation, and finally on engineering and
other machinery. The Bombay mills spent much more amounts on
modernising their weaving departments, followed by spinning. In
this sense, their expenditure pattern differed from Ahmedabad and
All-India mills, which were broadly on the same lines. The
results of the expenditure incurred in acquiring processing
machinery by the Ahmedabad mills can be seen in Table 4.13.
Except for printing, which depends on fashions, the amount of
processing done on fabrics can be observed to have increased
drastically over the decade 1975 - 1985, increasing greatly the
value of the fabrics processed instead of being sold in the grey
stage.
107
It is generally felt by textile experts that the modernisation
programmes undertaken by many of the Ahmedabad mills have been
inadequate and ad hoc, with short-term planning instead of being
part of a long-range plan formulated to modernise department-wise
from the blow-room to the loom-shed. In part this was due to the
fact that most of the mills were so old and the machinery so
obsolete that the needs of finance were very high and the means
at the disposal of the mills were too few for a massive
reconstruction. Help from policy, though often recommended by
various government committees and groups, apparently came too
late and in insufficient quantities to be really effective for
them. Thus it seems that in most mills modernisation was
undertaken either to expand some sections or balance the
machinery due to changes in other departments or as a result of
change in product-mix. In many instances, however, the mills were
not able to sustain the production or sales or both of the new
product-mix' and either reverted back to the old varieties or went
sick trying to combat high inventories, larger working capital
requirements and interest charges.
108
MARKETING AND DISTRIBUTION IN THE AHMEDABAD MILLS
The organis~d textile industry is gradually being edged out of
the domestic market by the decentralised sector and is finding it
most difficult to market its products. Market oriented thinking
is a necessity in today's competitive world, where there are too
many goods chasing too few customers. It is the market-place, not
the factory, which ultimately determines which companies will
succeed, and companies with "marketing myopia" pay dearly.
Marketing is a difficult art-psychological forces play a large
role, marketing expenditures affect demand and costs
simultaneously, marketing plans shape and interact with other
business fuqction. plans and marketing decisions must be made
quickly in the face of insufficient information about processes
that are dynamic, lagged, stochastic, interactive and very
difficult to assess accurately.
The marketing environment consists of a macro environment and a
micro environment. The macro environment includes broad trends in
the demographic, economic, political/legal, social/cultural,
technologicml aspects which can have profound impact on the
company's market. These trends have already been described in
Chapter II on the policy and market environment for the textile
industry. The micro environment consists of the customers, the
competitors, the suppliers, the marketing intermediaries, etc.
The company needs to know, for example, how many households plan
to buy its products, who buys, what do they buy, what are their
reactions to;changes in quality and price, where do they shop,
what are their concepts about the company's competitors, the
potential influence of advertising, sales promotion, personal
selling, etc. on consumer choice decisions.
With few exceptions, for most textile mills in India, marketing
has mostly meant distribution. Marketing of textiles in India in
the real sense of the word has been a very recent phenomena and
that too on a very limited scale. On the other hand, it should
also be pointed out that some pioneering mills in the area of
advertisement and promotion in the 1950s to 1970s are now lying
10 9
either sick or closed. Two such examples are the DCM group and
the Calicp Mills. However, this only brings out the fact that
proper marketing also includes intensive market research, follow
up measures and on optimum pricing policy besides promotional
activities like advertising, retailing and fashion shows. Very
few mills today have an extensive marketing network or provision
of substantial advertising budgets to successfully respond to the
changing economic and marketing environment for textiles. Though
awareness has been steadily increasing, far too many mills are
still dependent on the distribution channels for marketing.
The Evolution of the Textile Distribution System.
A review of the development of marketing practices followed in
India and Ahmedabad in the last century and how they evolved can,
in part, explain the present textile marketing practices and put
them· in their proper perspective. As mentioned earlier, marketing
of textiles in India in the real sense of the word has been a
very recent phenomena and that too on a very limited scale; for
most mills marketing has been limited to distribution. Over the
years, a vast network of wholesalers, semi-wholesalers, retailers
and commission agents has evolved, responding to changing times.
A century ago, nearly 60% of India's domestic fabric
was imported from abroad. Calcutta was the chief
consumption
centre for
wholesaling of imported cloth. Of the domestic production, 71%
was produced on handlooms and only 29% by mills. Bombay w?s the
next important centre where wholesaling of domestic mill-made
fabrics mostly coarse fabrics produced by mills in Bombay,
Ahmedabad, Kanpur and other places took place. It was also the
main centre for export of cotton and yarn. As for handloom
fabrics, 15-20% were estimated to be consumed in the producer's
home, 10% exported and the rest were marketed within the country,
most of it being sold within the region itself because of the
traditional character of the consumer and specific modes of
attire limited to the region.
While handloom production remained steady at around 800-lOOOmn.
yds., production of the mill sector increased from apptox. 300mn.
yds to 4000mn. yds between 1896 and 1950. By then, imports w~re
negligible and nearly 74% of the domestic production was mill
made, only 17.5% handloom-made and 4.5% powerloom-made out of a
total availability of about 4500mn. yds. The average cost of
cotton fabrics in 1950 was 12annas-7paise for coloured cloth.
Rayon fabrics, a luxury cost Rs.l-1 as per yard. Average gross
annas margins of traders were estimated between 5-10% upto 1940,
profits were small in relation to the risks involved and traders
held large accumulated stocks. Stocks of cloth maintained for 5-6
years was not uncommon before the war. Traders carried 3-4 times
the unsold stock carried by the mills which depended heavily on
the trade to finance the trade and providing working capital.
During the war years, there was frequent accumulation of stocks
and the distributive agencies undertook this burden. In 1937, for
example, which was a difficult year for mills, 10,000 bales on an
average remained unsold with the Bombay mills against 55,000
bales held by them on behalf of dealers as sold but u~delivered.
In 1938, a more difficult year, the figures were 4000 and 84000
bales respectively. There was a gradual reversal of trends during
the wars. The supply position was no longer easy and carrying of
stocks afforded almost certain prospects of appreciation for the
mills. Sales ceased to be a problem even for the most efficient
mills and the traders were deprived of most of their bargaining
strength. This state of affairs continued through the 1940s when
the Swadeshi Movement encouraged the use of domestic cloth. The
partition of India took away 70mn consumers of cloth and most of
the cotton-growing areas. This was a very difficult period for
the mills and the traders regained their original powerful I
position.
Marketing Functionaries
Traders of fabrics are either wholesalers who buy and sell
fabrics in packed bales, semi-wholesalers who purchase packed
bales either from wholesalers or mills and sell 'Thaans' to
retailers after opening the bales, and retailers who sell to the
lll
consumers in piece-lengths of their choice. Non-trading or
facilitating intermediaries bring the trading intermediaries
together, sometimes guaranteeing payment for the goods. They
include commission agents, indenting agents, adatiya~ and
brokers, operating for a commission/brokerage on sales effected
through them. There are various permutations and combinations of
the distributive chain chosen by mills and often mills employ
different chains for different varieties. The length of the
distributive chain varies from MILL-COMMISSION AGENT-WHOLESALER
BROKER-SEMI WHOLESALER-COMMISSION AGENT-RETAILER (which is the
costliest but offers widest geographical reach) to MILL
COMMISSION AGENT-RETAILER (which is shorter and least costly but
offers limited reach).
In orper to market its production, the mills in Ahmedabad make
use of a distributive system which broadly represents the all
Indian system, and which has been operating and evolving for more
than a century. The sole-selling agency system has vanished and
wholesalers also are a vanishing breed, many of them turning to
semi-wholesaling functions also. Most of the mills now.have their
own ¢salesman• or sales executive who is in charge of the
marketing functions. Very few mills as yet have the post of
marketing managers or an elaborate marketing set-up. Since having
one retail. shop was statutory until recently, many mills in
Ahmedabad had a retail shop within the premises. While some mills
had their retail outlets in the commercial areas, very few had
multiple retail shops or retail outlets through authorised
dealers and ·fewer still as a national network. The Calico mills,
now sick s~nce a long time, was the leading mill in terms of
marketing and besides advertising, held its own fashion shows all
over the country, and employed professionals for market res~arch.
Of the total cloth production by the Ahmedabad mills, nearly 70%
has been estimated to be distributed through the local market and
the rest through indenting or consignment system. There are
nearly 1800-2000 wholesalers located mostly in the New Cloth
Market, about 2000-3000 semi-wholesalers located mostly in the
Dhanalaxmi, Mahaveer, Bombay and Panchkuva markets, and 4000-5000
112
retailers spread all over the city, but concentrated in the
Panchkuva, Prem Darwaja and Ratanpole markets. While the·
commission agents who are the purchase agents of outstation
dealers take physical delivery of goods at a .commission of
around 1.5%, the brokers merely liase between the buyer c1nd
seller without in any way influencing the terms of trade or
undertaking either possession or ownership of the goods for a
brokerage of about 0.5%. In many cases, Commission Agents operate
as wholesalers and semi-wholesalers also, depending on the market
trends and av~ilability of finance. The average annual turnovers
of the Bombay wholesalers have been much higher than the
Ahmedabad wholesalers (ATIRA, 1990)and most of them are more
dynamic and risk-taking than their Ahmedabad counterparts. Many
of the managements of the Ahmedabad mills held that their efforts
at increasing the sale volume and at introducing new products
into the market were hampered by the conservativeness of the
Ahmedabad merchants. According to the merchants, the rates of
state-imposed octroi, sales, entry tax and other levies are very
high compared to the centres in other states. Moreover,
industries using industrial fabrics, non-woven fabrics or gee
textiles, and the readymade garment industry are mainly situated
out of the state. The transport cost and the high levies for all
incoming and o~t going textile products (except cloth) ~ender the
products of the Ahmedabad mills uncompetitive in the outstation
markets.
The Sales Organisation in the Mills
I
Most of the European management controlled mills like the Finlay
Group, Elgin Mills, Cawnpore Textiles, Atherton West Mills, some
Indian managed mills like the Swadeshi Mills, and most of the
Ahmedabad mills formerly relied on the sole selling agency system
for sales, which is now redundant. The agents were paid about
1.5% commission on production quantity or sales. These selling
agents used to finance the mills through deposits. They were
responsible to the mills for monthly payments, and in. case of
delay, would also finance the wholesalers. This eased greatly the
working capital situation of the mills which depended on priv~te
113
funds and public deposits in the near-absence of organised
banking facilities for finance. Some mills directly sold to the
wholesalers through commission agents. The Birla, DCM and .Tata
groups followed.the practice of ex-factory sales for ready stocks
by Agents in mixed bales of various qualities. Upcountry sales
were made either on consignment basis or by appointing Indenting
agents, or through local commission agents called ¢Adatiyas•.
In Bombay, the wholesalers were concentrated in the Moolji Jetha
Market. In Ahmedabad, the traders formed an association called
the Maskati Market Mahajan, which regulated all the trade and
resolved disputes. In Ahmedabad, mills generally being smaller in
size,
Hence
were willing to handle small orders in wider
wholesaling never quite assumed the high
assortments.
degree of
specialisation of the Bombay traders. The wholesalers because of
their strong bargaining position started acting as originators of
production decisions and entered into forward contracts. 1There
were close connections with the production departments of mills
and they could even change production schedules in direct
consultation with the weaving master. The role of the traders in
India as financiers of the mills after the production and packing
of cloth gave them an upper hand.
The dependence of the mills on the trade channels in the days
before the wars should be viewed in the context of a period when
systems of credit were primitive, and so were communication and
transport. All upcountry sales carried a credit of 3-4 months.
The importance of the wholesalers thus becomes clear. Besides
acting as financiers and stock-holders, they also provided market
research information on the mill's own fabric as· well as
production quantities, qualities, schedules, and prices of
competitive mills. Mills were complacent about sales and profits.
The days before 1930 were described by Sir Cusrow Wadia as " __ _
halycon times for us all steady profits, steady labour, no
strikes, and above all, no stocks.•• (Wadia, 1940) ..
The weaknesses of the traditional selling practices were acutely
felt after the Second World War, when the cumulative effects of
government controls over production and keen competition
114
manifested themselves in huge stocks and decreasing prites.
Management started paying more attention to sales and new
approaches were tried, especially by the more progressive mills.
The beginnings of direct sales to retailers and to consumers in
the form of the mills' own retail shops were made during this
period. The importance of brand names also emer~ed and incr~asing
attention was also paid to packing and finishing of fabrics. New
modes of publicity like exhibition trains, display of publicity
posters, postcards inviting comments from consumers were adopted
by a few mills.
The increasing urbanisation and faster channels of transport and
communication gradually weakened the hold of the local Adatiyas
or agents on whom the upcountry merchants relied upon to deal
with the wholesalers of mills' fabrics. The impact of faster
transport was not only felt in the shortening of time for the
goods in reaching the final consumer, but also in the gradual
evolution of a national market for all types of varieties as
against traditional regional varieties. The proportion of 1 urban
population increased from 9% in 1881 to 18% in 1951 and 26% in
1991.
Today,
mills
in
are
the face of fierce competition in a buyers'
trying to shorten the distributive chain as
market,
much as
possible to minimise expenses and establish closer contact with
the end-consumer. They are increasingly selling directly to the
semi-wholesaJers, retailers and manufacturers of ·ready-made
garments and using cheaper non-trading intermediaries. Just as
the system of sole-selling agents (dalal system) was replaced by
the practice of selling directly to wholesalers, there has been
an increasing tendency to circumvent the wholesalers who have
increasingly begun to take on semi-wholesaling services for
powerlooms. Mills have been trying to shake off their dependence
on middle-men. Cost-wise, it has been proved that the textile
distribution costs estimated between 27-35% are very reasonable
compared to other countries (NCAERT, 1978, liM, 1982 and ATIRA,
1990). In any case the fierce competition in the market is the
most effective deterrent to excessive margins. The structure of
115
the present textile industry is highly fragmented and so is the
structure of the distributive trade with a large number of
traders competing amongst themselves without any barriers to
entry or exit. The fact that relativelj more expensive systems
continue to be in operation suggests that they play a role which
cannot, as yet, be replaced. Small or sick mills already
financial problems are not in a position to deal with so
semi-wholesalers or retailers directly and carry
inventories.
Limitations of the Distribution System
facing
many
heavy
While there is considerable identification of mutual interests
between the mills and the traders, there are certain functions
which cannot be fulfilled but the middlemen in the context 9f the
changing marketing environment in the country. An effective
marketing programme should consist of the following essential
elements :
i) A well laid-out product policy keeping in mind the company 1 s
resources and the changing market conditions;
ii) A realistic and optimum pricing policy which takes into
account the competitive forces in the market as well as
yields maximum returns;
iii) A promotional programme which effectively backs up the
company 1 s products in the market;
iv) A market research system and field-marketing organisation
which constantly provides feedback on the company 1 s own as
well as competing products, new developments, new markets,
general trends in the market and follow-up of the company 1 s
promot~onal activities; and finally
v) An efficient market information system.
With very few exceptions, most of the textile mills in India
depend on their traders and salesman for providing all the above
marketing functions. While their long-standing trade connections
and experience in handling textiles are of great value in
providing certain marketing services like financing, collection,
ll 6
transportation, warehousing and distribution, these functions
alone are inadequate in ensuring effective marketing. In the
context
growing
mills
of the emergence of a buyers' market in
competitions from within and outside the
need to implement a marketing programme
textiles
industry,
with all
and
the
the
constituent elements described above. This does not mean that
modern mark7ting should do away with the middlemen and resort to
direct selling but it should devise means and methods to fill
some gaps within the framework of the existing marketing system
through appropriate management policies so as to make it more
responsive to the changing environm€nt. Some of the gaps and
inadequacies of the marketing activities of many of the Ahmedabad
mills can be grouped under the following heads:
1. Product Policy
2. Pricing Policy
3. Promotional Programmes
4. Market Information System
1. Product Policy : Most of the mills in Ahmedabad decide their
product-mix in consultation with the wholesalers or semi
wholesalers, based on their recommendations on constructions,
colours and designs. Except for the 'premium' sorts, or sorts for
which the mill has a brand image in the market, it is usually
the trader who has the upper hand. Though most mills have a
regular production of its particular standard varieties, the rest
of the loom programming is often subject to short-term changes
depending on the season or fashions. Very often, this results in
the production of large varieties of fabrics of shorter
production runs with higher costs. This short-term policy
followed by most of the Ahmedabad mills has been defended by the
mill-managements on the grounds that the traders would not lift
the goods produced by the mills without consultations with them
as they would not sell in the market. There are very few mills
having certain 'premium' varieties which can sell themselves,
even in Bombay. Those mills which have traditionally been
producing varieties which have been taken over by the powerlooms
have relatively lesser choice in formulating long-term product
117
policies unless they are market nichers specialising in a few
varieties for a specific target market, with an established brand
image. Developing a successful brand image is not necessarily an
expensive and painful process. It means finding a target market
and supplying consistent quality for the price. Thus, for
example, a low-priced poplin manufactured for .the rural market
may be of inferior quality commensurate with the price but that
quality should be consistently maintained. While it is true also
that dependence on a few varieties is dangerous, economies
affected through production of a few varieties in term of
planning and costs are substantial. If it is supported by an
efficient market information system, the mill can have enough
warning about changing the product-mix in the long run.
Contrary to the general impression, some mills in Ahmedabad have
been pioneers of new varieties. Denim was first introduced in
India as early as 1970s by the Aryodaya Mill of Ahmedabad which
also sold denim garments in its retail shops. The Arvind Mills
was amongst the first in India to introduce and specialise I
specialised
in
high quality ¢butta' voile sarees. Some mills in
woven jacquard bordered sarees, which were later reserved for I
handlooms. The Calico Mills introduced the ¢carbonised' process
and other synthetic sarees and dress materials with heavy
promotional backup in the form of advertising and fashion-sl1ows
all over India. The Sarangpur Mills was amongst the first in
India to sell directly to manufacturers of ready-made garments
internationally
the Ahmedabad
mills, brought
as well as nationally. The onset of sickness in
textile industry, especially in the progressive
an end to the introduction of new products.
Innovative marketing should be backed by accurate market research
and pricing systems to be successful.
By and large, the Ahmedabad mills seem to have responded to
changing consumer preferences 1n terms of fibre. While
consumption of cotton fabrics in India reduced from 88% to 70% in
quantity and from 65% to 38% in value over the decade, people
have increasingly been preferring non-cotton and· blended/mixed
fabrics. We. have already seen earlier in this chapter the
118
product-mix changes undertaken by the Ahmedabad textile industry
in the decade 1975-1985. Though the total production has
decreased from around lOOOmn mts to 600mn mts, the industry has
shifted toward blended/mixed fabrics and in 1985, produced 35.5%
of the total All-India organised sector production of these
fabrics, though mainly in the medium-count varieties. Fibre-mix
data available only for 1980 shows that 45% of the blended/mixed
fabrics in Ahmedabad were polyester-cotton, and 21% were
polyester-viscose-cotton blends. However, compared to the
Ahmedabad mills, the Bombay mills have been more diversified in
their product-mix. By 1988, the last year for which data is
available for Ahmedabad, though total production was further
reduced to 433mn. mts. due to closure of many mills. Cotton,
blended/mixed and non-cotton fabric production accounted for
50.2%, 48.5% and 1.3% respectively in 1988.
Within cotton fabric production, the bulk of the industry's I
production has been higher-medium quality fabrics. Nearly 85% of
the wearable varieties of cotton cloth production of the
Ahmedabad mills is accounted for by poplins and shirtings, and
both these varieties are produced by powerlooms at much lower
cost, providing stiff competition (Table 4.11). The Bombay mills'
production of poplins and longcloth accounts for 57% of the
total, the rest being a diversified mix. The production of non
wearable fabrics accounted for only 1.5% to 2.5% of ·the total
production of Ahmedabad mills in 1975 and 1980, while the
proportion was much higher, at 7.4% to 8.5% for the Bombay mills.
A progressive company is always in search of new and remunerative
markets. Exports are one such avenue. The Ahmedabad mills exports
have been meagre and erratic, though mills have started taking
interest in the last few years to take advantage of the various
export inGentive schemes offered by the government. Except for
the 7 mills of the Lalbhai Group, which have established a common
Export House in Bombay and have been consist~ntly exporting
between 3% to 12% of their production, and a very few other big
mills, most of the exporting mills fiave been active only after
1987. Until then, exports ranged between 2.4% to 6.4% of the
119
total cotton cloth production of Ahmedabad, three-fourths of
which belonged to the higher-medium category mostly in grey form.
In 1988, the last year for which figures are available, and the
year in which many mills started exporting, exports were 17mn.
mts. or 8.6% out of a total production of 198mn mts. The break-up
of exports of cotton, blended/mixed and non-cotton fabrics was
88%, 10% and 2% respectively for the Ahmedabad mills.
Though getting into exports and maintaining them needs constant
vigilance and care regarding quality, export marketing should be
given serious consideration by mills when they are gradually
being edged out of the local market. Proper market research would
bring out products which an individual mill can produce
commensurate with its available machinery and which it can sell
in the international market. Interviews revealed that most mills
cannot afford Export Houses in Bombay and face many difficulties
in handling exports. The other alternative of selling through
merchant exporters leaves very low margins or none.
2. Pricing Policy : The use of a pricing policy as a major tool
to maneuver the marketing of yarn or cloth is not yet very
prevalent in the organised textile sector. An effective and' well
thought-out pricing strategy backed up by a proper product policy
and market research system which can help to find a target market
can not only lead to higher profits, but also help to boost up
its sales and improve the image of the mill in the market. In
monetary terms, if an average mill with a production of 60,000
metres per day can obtain only 10 paise more per metre, it can
earn an extra Rs.6,000 per day, or Rs.l50,000 per month or
Rs.l.8mn pe~ year. The small mills, prices are often set by the
top management in consultation with the wholesaler and the
¢salesman• or sales executive. In larger mills, pricing is
handled by the sales executive in consultation with the
divisional managers, but the top management sets the general
pricing policies and objectives and often approves the prices
proposed by them.
Generally, the prices for particular varieties are based on the
price fixed by the ¢leader', except for exclusive varieties. In
120
Ahmedabad, being a more conservative centre compared to others,
mills have their fixed image in the market for their standard
varieties and it is a more difficult"and long-drawn out process
to change it. Again, the trade has full knowledge of the mills
financial condition and takes full advantage of its weakness.
Sick mills have perforce to give into keep the working capital
circulating, which leads to a vicious circle of lower margins-
lesser profits-financial stringency-immediate need of working
capital-distress sales. Besides the monetary aspect, information
on domestic and international prices of the varieties sold by the
mill as well as its competitors would go a long way in helping to
formulate the mills optimum marketing strategy helping it to find
new varieties it can produce, commensurate with its .financial
and mechanical capabilities. It can also help in targeting the
market-rural, urban or export. Though data availability for
marketing in India is extremely meagre, estimates provided by the
Textile Committee Surveys on Consumer Purchases of Textiles may
provide broad guidelines on which it can further concentrate its
efforts. The mills are facing severe competition from powerlooms
and unless they make full use of their strengths in terms of
organisation and machinery, select target markets and specific
varieties which cannot be produced and sold by the competitors at
the required quality, volume and price, they will be fully edged
out of the market.
3. Promotion Policy : Modern marketing strategies not only
include the development of company's products, pricing and
distribution, but
various activities
also promotion. Promotion
the company undertakes to
stands for
communicate
the
the
merits of its products and to persuade target consumers to buy
them. They include advertising, sales promotion, publicity public
relations and personal selling. In the context of a developing
economy like ours, producers have to try very hard to find a
place for their products in the consumer's purchase basket. As we
have seen earlier, the organised sector has been facing stiff
competition not only from consumer durables, but also from
powerlooms. Inflation has not only b€en responsible for
increasing the costs of production, but also for lim1ting the
121
purchasing power of the consumers. An aggressive promotional
policy would help the mills to push their products through to the
target markets so that they can survive profitability.
Only a few leading mills in India and hardly any in Ahmedabad
have been following a well planned promotional strategy for
marketing. In Ahmedabad, the Calico mills was the foremost. It
had a full-fledged advertising campaign backed by nation wide
retail outlets and fashion shows. It also followed them up witl1
professional agencies assessing consumer acceptance. Others
included the Mafatlal Group's New Sharrock Mill, the Tata Group's
Advance Mills and the Arvind Group of Mills. Each of them
advertised their products as part of a group and not
individually. Thus, for example, it was the Mafatlal fabrics that
were advertised together, which included all the mills in the
Mafatlal group. Thus, formerly, only mills which were part of a
larger group undertook promotional activities. Then in the 1970s, I
the Aryodaya mills started advertising its Denim range and the
Sarangpur mills its sales to Bonds, the international readymade
manufacturers. Then BVM came up with the corduroy campaign and
other mills like Maneklal Harilal, Rustom, and Mahendra joined
in. Apart from Calico, the other mills mainly indulged in
advertising activities and only lately have been promoting
through fashion-shows. The promotional budgets of most of the
mills even in India forms a very small percentage of the sales
revenue.
The mills should not only promote their brands at the consumer
level, but they should also adopt promotional policies of pulling
their products through the distribution channel. The promotion of
the products 1s by and large completely delegated to the
middlemen by the textile mills, mostly without providing
additional funds earmarked for this purpose. The middlemen also
do not possess adequate staff to undertake promotional
activities. Thus once the products leave the mill premises their
further movement upto the consumer is entirely left to the
initiative of the individual cha~nel members. With a few
exceptions, the retailers do not seem to identify their interests
122
with tl1ose of the mills and by and large except for well-known
varieties and specialities, textiles become generic products at
this level. Mills could devise and implement promotional schemes
to enthuse and get active cooperation from their retailers. This
would necessitate a network of field staff which may be involved
with both follow-up and market research activities. By and large,
most mills seem to be shying away from promotional activities of
this kind, which would prove most rewurding in the long run.
4. Market Information System : A marketing information system is
a continuing and interacting structure of people, equipment and
procedures to gather, sort, analyse, evaluate and distribute
pertinent, timely and accurate information for use by marketing
decision makers to improve their marketing planning,
implementation and control.
The need for efficient planning, implementation and control of
marketing operations make the development of an effective market
information system an important prerequisite for effectively
marketing the company's products. In a rapidly changing
environment, the mills would need to know the changing consumer
tastes and preferences, new market openings, competitive
developments with regard to prices and products, knowledge about
the movements of their own varieties in the markets and their
strengths and weaknesses as perceived by the consumer in terms of
quality. Moreover, planned development of the economy has opened
up new markets in the urban and rural areas as well as in foreign
countries.
At present, most of the textile mills 1n the country, and more so I
in Ahmedabad, solely depend upon the middlemen to provide this
sort of market information. Though the middlemen might apparently
have successfully carried out these functions in the past, under
the present circumstances they are inadequately equipped to play
this role. Through their long experience in the trade they can
and do sense .the various developments in the market and convey
them to the mills, but most of their assessments of market trends
are based on intuitive knowledge rather than hard facts. A total
12 3
dependence on this source of information may lead to erroneous
conclusions
the mills
which have sometimes even prove very expensive I
in terms of product/market development or choice
for
of
product-mix and under or over-estimation of market acceptance of
their varieties and lost opportunities. This is due to the
marketing gaps-informational, organisational and promotional
that the present system in most mills creates in the marketing of
textiles.
Trends 1n the marketing environment should be assessed and
analysed through a simple or elaborate internal reports system,
the marketing intelligence system and the marketing research
system consistent with the extent of the individual mill's needs.
The information is conveyed to the marketing managers to help
them in analysing, planning, implementing and controlling their
market strategies. The most basic information system used by
mills is the internal reports system which includes reports on
orders, sales, inventory levels, receivables, and so on, by which
they can s2ot problems, delays and opportunities. In most mills,
the marketing intelligence system is very informal and is
obtained either by word of mouth or trade publications. More
progressive mills have a trained and motivated sales force to
improve the quality and quantity o! marketing intelligence in
addition to the distribution channel. For its market research
functions, the company can either have its own marketing research
department which is very rare, or hire professionals or semi
professionals for the purpose. The most common functions are
market share analysis and potentials, competitive product
studies, pricing studies, determination of market
characteristics, sales analysis, market trends, short and long
range forecasting and such like. The scale of operations, the
kind of product-mix, the nature of the markets for its products
and such other considerations will determine how elaqorate the
marketing information network should be. Again, the mills can
start at an elementary level, which can become more elaborate
with the passing of time and a widening of the markets for its
products.
124
We thus see that there is a great diversity in the marketing
practices of different mills. While the entire textile mill
sector is passing through a period of crisis, some of the more
progressive, larger and well-financed mills with a marketing
organisation have been able to face the situation relatively
better, though the earnings of most of them have been declining.
Some well organised mills are able to survive successfully even
with traditional systems of distribution, though in the case of
these mills their selling through middlemen .is usually supported
by well-organised sales departments and substantial, though
primitive promotional activity aimed at creating a brand image in
the market. What is needed in the present context is a cohesive
mix of product differentiation, pricing, promotion and
distribution systems based on a market information system with a
degree of elaboration that is commensurate with· the company's
scale of operations and its resources.
Though the Ahmedabad mills were pioneers in introducing new
varieties, it seems that they were not able to sell many of the
efficiently enough to penetrate and sustain the market.
Apparently this has be~n due to various factors like exclusive
dependence by most of the mills on the distribution channel, not
enough market research to find new markets or .to follow-up on the
existing ones, pricing its products mainly on a cost-plus basis
after taking into account the prevailing business cycle, and
employing primitive and basic promotion techniques. Marketing is
a very potent weapon to fight a competitive market and an
important determinants of profitability in the kind of
environment prevailing in the Indian economy for textiles.
125
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