man made fiber

7/29/2019 Man Made Fiber

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An Assignment on

MAN MADE FIBERS INDUSTRY:

Spinning its Fortune

SUBMITTED TO SUBMITTED BY

Dr. J K Sharma Aditya Singh

Professor MBA Finance

Department of Business Administration,

University of Lucknow


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INTRODUCTION

Man-made fiber are those fibers whose chemical composition, structure, and properties are

significantly modified during the manufacturing process. Man-made fibers are spun and woven

into a huge number of consumer and industrial products, including garments such as shirts,

scarves, and hosiery; home furnishings such as upholstery, carpets, and drapes; and industrial

parts such as tire cord, flame-proof linings, and drive belts. The chemical compounds from

which man-made fibers are produced are known aspolymers, a class of compounds

characterized by long, chainlike molecules of great size and molecular weight. Many of the

polymers that constitute man-made fibers are the same as or similar to compounds that make up

plastics, rubbers, adhesives, and surface coatings. Indeed, polymers such as regenerated

cellulose, polycaprolactam, and polyethylene terephthalate, which have become familiar

household materials under the trade names rayon, nylon, and Dacron (trademark), respectively,

are also made into numerous non fiber products, ranging from cellophane envelope windows to

clear plastic soft-drink bottles. As fibers, these materials are prized for their strength, toughness,resistance to heat and mildew, and ability to hold a pressed form.

Man-made fibers are to be distinguished from natural fibers such as silk, cotton, and wool.

Natural fibers also consist of polymers (in this case, biologically produced compounds such as

cellulose and protein), but they emerge from the man made fiber manufacturing process in a

relatively unaltered state. Some man-made fibers, too, are derived from naturally occurring

polymers. For instance,rayonandacetate, two of the first man-made fibers ever to be produced,

are made of the same cellulose polymers that make up cotton, hemp, flax, and the structural

fibers of wood. In the case of rayon and acetate, however, the cellulose is acquired in a radically

altered state (usually from wood-pulp operations) and is further modified in order to beregenerated into practical cellulose-based fibers. Rayon and acetate therefore belong to a group

of man-made fibers known as regenerated fibers.

Another group of man-made fibers (and by far the larger group) is thesynthetic fibers. Synthetic

fibers are made of polymers that do not occur naturally but instead are produced entirely in the

chemical plant or laboratory, almost always from by-products of petroleum or natural gas. These

polymers include nylon and polyethylene terephthalate, mentioned above, but they also include

many other compounds such as the acrylics, the polyurethanes, and polypropylene. Synthetic

fibers can be mass-produced to almost any set of required properties. Millions of tons are

produced every year.
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Classification of the industry

The norm ISO 2076-1999 (E) provides a list of the denominations commonly used to designatethe different categories of man-made fibers which are usually produced on industrial scale forman made fiber uses and other applications.

Every common denomination is defined through attributes, normally based on chemicaldifferences expressed with chemical formulas, which often have different distinctive properties.


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Scope of the industry

The Man made fiber industry in India traditionally, after agriculture, is the only industry that has

generated huge employment for both skilled and unskilled labor in man made fibers. The man

made fiber industry continues to be the second largest employment generating sector in India.

It offers direct employment to over 35 million in the country.India is the second producer

but India will lead in all .

According to the Ministry of Man made fibers, the sector contributes about 14% to

industrial production

4% to the country's gross domestic product (GDP) and

17% to the country's export earnings.

The share of man made fibers in total exports was 11.04% during AprilJuly 2010, as per

the Ministry of Man made fibers.

It is estimated that India would increase its man made fiber and apparel share in the world

trade to 8% from the current level of 4.5% and reach US$80 billion by 2020.

During 2009-2010, Indian man made fibers industry was pegged at US$55 billion, 64%

of which services domestic demand.

Production in India

India is the second largest producer of fibre in the world and the major fibre produced is cotton.

Other fibers produced in India include silk, jute, wool, and man-made fibers. 60% of the Indian

man made fiber Industry is cotton based.

The strong domestic demand and the revival of the Economic markets by 2009 has led to huge

growth of the Indian man made fiber industry.

In December 2010, the domestic cotton price was up by 50% as compared to the

December 2009 prices.

The causes behind high cotton price are due to the floods in Pakistan and China.India

projected a high production of man made fiber (325 lakh bales for 2010 -11).

There has been increase in India's share of global man made fiber trading to seven

percent in five years.The rising prices are the major concern of the domestic producers ofthe country.


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ISSUES AND CONCERNS

Excise duty discrimination: A major concern area has been the historical discriminationof man-made fibers and man made fibers against cotton and cotton man made fibers in

the form of higher excise duties. Although there has been substantial reduction in exciseduties on man-made fibers and man made fibers during the last 10 years, the currentduties on MMF and MMF man made fibers are still high; while cotton is exempt fromexcise duty, MMF attracts excise duty of 8%. Further, while MMF man made fibersattract a mandatory CENVAT of 8%, cotton man made fibers have an optional CENVATof 4%. Any reduction in excise duties on MMF and MMF man made fibers will have ahighly positive impact on the growth of MMF consumption.

Lack of global competitiveness: Indian man-made fibers man made fiber industry hasnot been able to create a mark in the global man made fibers market post dismantling ofman made fiber quotas even though cotton man made fibers industry has witnessed a

substantial growth. Since dismantling of quotas (2005 onwards), Indian cotton apparelexports to the world have grown at about 10.7% CAGR, while MMF apparel exportshave witnessed a decline.

Limited number of players: There are only a few big players manufacturing man-madefibers in India. The industry follows a pricing policy on import parity basis at landed cost.User industry has submitted that MMF producers export man-made fibers at lower pricesthan in the domestic market. This submission is supported by SRTEPC exports dataanalysed by FIASWI in respect of polyester fibre and yarn.

Levy of anti-dumping duties: Indian MMF man made fiber manufacturers are alsofaced with higher fibre prices as against their global counterparts on account of levy ofanti-dumping duties on imports of majority of man-made fibers. This in turn affects theavailability of fibers to MMF man made fiber manufacturers at competitive prices.

Lack of indigenous production of specialized MMF: Various specialised man-madefibers (like acetate/ tri-acetate, cuprammonium filament yarn, nylon 66, nylon 11,spandex, etc) are not being manufactured in India despite having huge potential and thushave to be imported by the weavers.

High customs duty: Another factor that has contributed to higher costs of man-made

fibre manufacturers and thus for man-made fibre man made fiber manufacturers is thehigh customs duty on certain raw materials required for man-made fibre industry. Certainraw materials and additives used in the production of man-made fibers are necessarilyimported on account of limited domestic production/ lack of requisite quality. Some ofthese raw materials and additives like rayon grade wood pulp (used for manufacture ofviscose fibre), titanium di-oxide and spin finish oil (used as additives for manufacturingpolyester) attract high customs duty, while the same are either exempted or have lowercustoms duty in major competing countries. To enable a level-playing field with the


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global counterparts in the international export markets and to reduce the key input costsof man-made fibre manufacturers, it is desired that customs duty on such inputs areexempted. Since these items are largely imported due to shortage in domestic market,reduction in import duties on same is not likely to hurt the domestic manufacturers ofthese items.

High debt servicing cost: Another reason for relatively higher costs of man-made fibre/filament yarn manufacturers vis--vis the cotton man made fiber manufacturers andglobal counterparts is the high debt servicing costs of the former. The lending rates inIndia are in the range of 11% - 13.5% (IBA Website) and are significantly higher incomparison to competing countries like China (5.046.12% ; Source : Bank ofCommunication, China) and South Korea (5.726.33%), which contributes to muchhigher interest costs for Indian MMF manufacturers vis--vis counterparts in competingcountries. Further, concessional schemes like TUFS is not applicable for manufacturingsynthetic fibers, which puts this capital intensive MMF industry at a great disadvantagevis--vis the cotton man made fiber industry.

GST issues for man made fiber industry: Major tax reforms are expected in the formof Goods and Services Tax (GST), which is likely to be introduced next year. However,man made fiber industry has a major concern with respect to GST. The man made fibersindustry involves a lot of inter-state transfers especially at the fabric stage. Due to longsupply chain in the man made fiber industry involving traders in various cities, towns,etc, the inter state transactions are likely to take place among the organised players whoare above the threshold limit for GST exemption and small decentralised traders who areexempted from payment of GST. Consequently, the regular payee (one above thresholdlimit) would not get any credit for purchases from small decentralised trader but shallhave to pay full duty on the sale price.

List of players

Grasim Industries

Reliance Industries

Indo Rama Synthetics

JCT Fiber

India Acrylic

Pashupati Acrylon

Vardhman Acrylics

Zenith Fber

Century rayon

Kesoram Rayon

JBF Industries

Gujarat State Fertilizers


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Indian Scenario

India is the second largest producer of man-made fibers in the world (World Fibre Report

2008), with production of 2.50 billion kg of man-made fibers in FY09. The man-made

fibers produced in India include polyester (staple fibre as well as filament yarn), viscose

(staple fibre as well as filament yarn), acrylic (staple fibre), nylon (filament yarn) and

polypropylene (staple fibre as well as filament yarn). India is the second largest producer

of PSF, PFY, VFY, third largest manufacturer of VSF and eighth largest manufacturer of

ASF

CHANGING FIBRE COMPOSITION The Indian man made fibers industry is

predominantly cotton oriented with cotton accounting for 59 percent share of total fibre

consumption. However, globally the fibre consumption ratio is reverse, with MMF

constituting 60% of fibre consumption. Globally, consumption of fibers has tilted in

favour of MMFs over cotton due to various factors like changing fashion trends coupled

with limitations to production of cotton. Even in India, the demand for man-made fibershas grown substantially over the last decade, as it has emerged as a major substitute for

cotton. The demand for synthetic man made fibers has been growing due to its lower cost

coupled with convenience and maintenance benefits associated with the usage of

synthetic garments. The share of man-made fibers in total fibre consumption (cotton and

MMF) has risen from 25% in early nineties to 41% at present.

POLYESTER ACCOUNTS FOR LARGEST SHARE IN MMF During the last ten years,

demand for man-made fibers has grown at a CAGR of around 3% from 1.6 million kg

(FY99) to 2.4 million kg (FY09). Amongst all fibers, polyester filament yarn has

recorded the highest growth of over 6% per annum. Steadily declining prices of PFY

have been one of the major factors pushing its demand in the domestic market. Huge

capacity additions during the post quota period have also helped in increasing the supply

of PFY in the market, thereby pushing down the prices and hence increasing the demand.

Also,rising cotton prices coupled with increasing exports of cotton and cotton based man

made fibers helped polyester industry to capture some of the domestic market share from

cotton.

EXCESS CAPACITIES Indias manufacturing capacity (functional installed capacities)

for man-made fibers at present stands at 3.4 billion kg (FY09), of which polyester

accounts for 82.9%, followed by viscose with 11.6% and remaining is of other man-made

fibers. Indias manufacturing capacities for all man-made fibers at present is more thanadequate to meet the domestic demand.

RAW MATERIALS AVAILABILITY The availability of rayon grade wood pulp for

manufacturing viscose is a challenge in comparison to paper-grade pulp as margins in

case of latter are better. Moreover, wood pulp industry is subjected to various

environmental regulations across the world and these can be expected to increase in

future in the wake of changing climatic conditions. Further, for exports purpose industry


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players usually import wood pulp as the quality of imported raw material is superior.

Thus, future availability of rayon grade wood pulp is an area of concern and could affect

the growth of viscose fibre industry.

PRICE MOVEMENT OF MMF Over the last decade, prices of key man-made fibers

like PSF and PFY have seen a steady decline, which has contributed to higher demand for

same. One of the reasons for reduction in prices is the capacity build-up leading to

economies of scale for key MMF manufacturers and gradual reduction of excise duty.

Future Demand in the Industry

Currently, India has excess capacities for many man-made fibers/ filament yarns and these

are adequate to meet the current and near future demand for man-made fibers. However,given the changing consumer pattern in favour of man-made fibre based man made fibers,

there is a need to assess the medium term and long-term demand for man-made fibers in

India. The demand for man-made fibers depends upon the demand for yarns and fabrics,

which in turn depends upon the consumption of finished man made fibers viz. apparel and

made-ups. Thus, in order to determine the future requirements for man-made fibers/ filament

yarns, we first need to assess demand for fabrics and finished man made fibers made from

man-made fibers, both for the domestic market as well as exports.

A top-down approach has been followed to determine the demand for man-made fibers in

FY15 and FY20. We have considered three scenarios, namely GDP growing at 7%, 8% and9% respectively for the next ten years. The share of private final consumption expenditure is

taken as 67%, in line with the average share over the past five years. The Eleventh five year

plan report of the planning commission for Man made fibers and Garments considers the

share of man made fibers and clothing in PFCE to be around 5.5% for FY08. It has been

observed that over the past few years, the relative share of man made fibers and clothing in

total PFCE has come down due to increased private expenditure on transport and

communication, education, recreation, etc. Thus, we have considered the share of man made

fibers and clothing in the PFCE to be 5.3% for FY15 and 5.1% for FY20.


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Major producer countries of MMF (2007)

Fibre CountryPFY China, India, Taiwan, South Korea, IndonesiaPSF China, India, USA, Pakistan, South Korea

Nylon China, USA, Taiwan, South Korea, GermanyVSF China, Indonesia, India, Taiwan, Thailand

ASF China, Turkey, Japan, Germany, TaiwanVFY China, India, Japan, USA, Czech Republic

Acetate USA, Japan, SpainSource: World Fibre Report 2011

Source: Fiber Economic Bureau (FEB)


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PEST ANALYSIS

Political Analysis

The political scenario of the industry is quite stagnant but do pursue a continuous series

of actions to uplift the sector and betterment of it. Some of them are as follows The 47th congress, held in September 2008, closed with a record attendance of

more than 720 visitors from 40 countries. Main topics included new fiber

developments, sportswear, safety, technical man made fibers and nonwovens.

However, the overarching subject was sustainability, with the focus on cradle-to-

grave products.

Industrial houses have demanded east UP to be declared a tax free zone to make it

an attractive destination for the industries. The region happens to be a hub of

cottage industries which produce a large number of export oriented products and

also employ nearly 42 lakh people. These industries contribute nearly 2000 crore

of foreign currency into the government's treasure. But the higher tax proves to be

an impediment for these industries.

A member of Central Silk Board said that in states like Uttarakhand, industries get

relaxation in the excise duty and VAT. Because of this the industries are

flourishing very well in the hill state. Industries are also growing rapidly in other

states which are giving relaxation in taxes.

On the other hand, there are certain industries in Uttar Pradesh which have to pay

entry tax along with the VAT. The man made fiber industries have to import their

basic raw materials such as cotton yarn, silk yarn, plastic yarn etc.

Madhya Pradesh has to attract Rs 10,500 crore investment towards the man madefiber industry for increasing its installed spindle capacity to 5% at 27.5 lakh

spindles of from the present state share of 4% by the end of the 12th Five Year

Plan, said state level working committee on integrated development of man made

fiber industry.

The international man made fiber and apparel fair scheduled to take place from

November 22 to 25 in the city is expected to provide domestic companies a global

platform as buyers from 58 countries have confirmed their visit to the event.

Besides, four states have also sent their consent to participate in the event. The

fair 'Vastra - 2012' supported by Union ministry of man made fiber and to be

organized by RIICO and FICCI

Several proposals like reduction in excise duty on yarns, widening of man made

fiber upgradation fund, slashing of customs duty on import of machinery and a

special package for the powerloom sector with many welfare measures for the

workforce, as announced on Friday, have made Union minister of man made

fibers Kashiram Rana a happy man, especially as he is the Member of Parliament

from here.
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Legal Analysis

Ministry of Man made fibers, Government of India , handles the various regulatory

authority for this manmade fiber industry.

Labour laws of Indian T&C industry: T&C industry comes under the purview of Contract Labour Act, 1970 which prohibits

contract labour for the work that is perennial in nature: The Factories Act, 1948 poses restrictions on the maximum working hours which further

affects the competitiveness of industry Indian Labour laws introduce unfair discrimination against large companies

Anomalies in Taxes and Duties VAT and CST are not adjustable: If a manufacturer while purchase in raw-materials has

paid VAT and while selling collects CST, he cannot avail a credit. Exporter does not get credit for VAT/CST paid during raw material purchase: When a

manufacturer exports all his goods he does not get any credit for the VAT or CST paid atthe raw material purchase stage. Customs paid while purchase and Excise collected while sale are not adjustable: If a

manufacturer imports raw material and pays customs duty on it, he is unable to adjust itagainst the excise that he collects while selling.

VAT on fabric is Nil: A fabric manufacturer pays VAT while buying the raw material butcannot collect the same while selling his product.

Anomaly in duty draw back rates: Duty draw back rates are not as high as effective dutiesas a result T&C exporters pay excessive duties.

The Trade Agreements Leading to Market Access for Readymade Garments

LTA underwent several renewals and was subsequently replaced by the MultiFiber Agreement (MFA) in 1974. MFA has governed international trade in manmade fibers and clothing since 1974. The MFA enabled developed nations,mainly the USA, European Union and Canada to restrict imports from developingcountries through a system of quotas. The Agreement on Man made fibers andClothing (ATC) to abolish MFA quotas marked a significant turnaround in theglobal man made fiber trade. The ATC mandated progressive phase out of importquotas established under MFA, and the integration of man made fibers andclothing into the multilateral trading system before January 2005.

Preferential Trade Agreement

The General System of Preferences (GSP) is an agreed exception to the MFNprinciple under which the Donor Country grants preferential duty on goodsoriginating in beneficiary country which is lower than the normal MFN duty.Each donor country is free to decide the level of concessions, the choice of goodsand the rules of origin in respect of GSP. Consequently, most GSP schemes aredifferent from each other in terms of the goods covered, the level of dutyconcession, the procedure to be used and the rules of origin that apply.


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Zero-for-Zero Tariff offered to IndiaLooking to opportunities in the vast Indian market, both EU and USA have offered India zerofor zero tariffs. Since labour costs in both USA & EU are higher than in India and sincefreight/insurance costs will add further to the landed value in India for their garments, thepossibility of EU/USA garments swamping India or competing unfairly with our domestic

industry is remote. The only possibility is that garments manufactured by East Europeancountries of EU or by Turkey (an Associate of EU), could possibly compete with our domesticindustry. Although operating costs in East Europe or Turkey may be low, freight to India andinsurance costs will neutralize whatever advantage (if any) they may have. The gain accruing toIndia by agreeing to a zero-zero tariff would be commendable.

2011-12 Budget Measures

i. Rs 30 billion funding to NABARD to provide support to financially unviable handloom

weavers with huge debt burdens.

ii. Optional tax levy at 10% made mandatory on branded garments and made ups.

iii. Surcharge on domestic companies reduced to 5% from 7.5%.

iv. Basic customs duty on nylon yarn and nylon fibre reduced from 10% to 7.5%.

v. Lower rate of central excise duty increased from 4% to 5%.

vi. Rate of Minimum Alternative Tax (MAT) proposed to be increased from 18% to 18.5% of

book profits.

Environmental Analysis

Man made fiber processing industry is characterised not only by the large volume of water

required for various unit operations but also by the variety of chemicals used for various

processes. There is a long sequence of wet processing stages requiring inputs of water, chemical

and energy and generating wastes at each stage. The other feature of this industry, which is a

backbone of fashion garment, is large variation in demand of type, pattern and colour

combination of fabric resulting into significant fluctuation in waste generation volume and load.

Man made fiber processing generates many waste streams, including liquid, gaseous and solid

wastes, some of which may be hazardous.

Air pollution

Most processes performed in man made fiber mills produce atmospheric emissions. Gaseous

emissions have been identified as the second greatest pollution problem (after effluent quality)

for the man made fiber industry. Speculation concerning the amounts and types of air pollutants

emitted from man made fiber operations has been widespread but, generally, air emission data


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for man made fiber manufacturing operations are not readily available. Air pollution is the most

difficult type of pollution to sample, test, and quantify in an audit.

Point sources:

Boilers

Ovens Storage tanks

Diffusive:

Solvent-based

Wastewater treatment

Warehouses

Spills

Source:http://www.indianman made fiberjournal.com/articles/FAdetails.asp?id=2420
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Water pollution The man made fiber industry uses high volumes of water throughout its

operations, from the washing of fibres to bleaching,dyeing and washing of finished products. On

average, approximately 200 litres of water are required to produce l kg of man made fibers

(Table 3). The large volumes of wastewater generated also contain a wide variety of chemicals,

used throughout processing. These can cause damage if not properly treated before being

discharged into the environment. Of all the steps involved in man made fibers processing, wet

processing creates the highest volume of wastewater.

Solid waste pollution The primary residual wastes generated from the man made fiber industry

are non-hazardous. These include scraps of fabric and yarn, off-specification yarn and fabric and

packaging waste. There are also wastes associated with the storage and production of yarns and

man made fibers, such as chemical storage drums, cardboard reels for storing fabric and cones

used to hold yarns for dyeing and knitting. Cutting room waste generates a high volume of fabric

scraps, which can often be reduced by increasing fabric utilisation efficiency in cutting and

sewing.

Source:http://www.indianman made fiberjournal.com/articles/FAdetails.asp?id=2420
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Social Analysis

The man made fiber industry is the largest industry of modern India. It accounts for over

20 percent of industrial production and is closely linked with the agricultural and rural

economy.

It is the single largest employer in the industrial sector employing about 38 million

people.

If employment in allied sectors like ginning, agriculture, pressing, cotton trade, jute, etc.

are added then the total employment is estimated at 93 million.

The net foreign exchange earnings in this sector are one of the highest and, together with

carpet and handicrafts, account for over 37 percent of total export earnings at over US $

10 billion.

Man made fibers, alone, account for about 25 percent of Indias total forex earnings.

On January 1st, 1974, the Arrangement Regarding the International Trade in Textiles,

otherwise known as the MFA came into force. It superseded all existing arrangementsthat had been governing trade in cotton textiles since 1961

Exporters in India fear that freer imports could lead to dumping of low-cost fabrics from

China and other Southeast Asian countries. Thus, the industry needs restructuring on all

fronts. Although the policy framework can be blamed partially for its ills, internal factors

are equally important.

Recommendations

The government also needs to make policy changes like dereserving the small-scale

sector so that it can achieve economies of scale and adopt a synergistic approach.

Human resource is another area of focus. The workforce must be trained and oriented

towards high productivity

The business environment of the future will be intensely competitive. Countries will

want their own interests to be safeguarded. As tariffs tumble, non-tariff barriers will be

adopted. New consumer demands and expectations coupled with new techniques in the

market will add a new dimension

Possible Indo-German Co-operation in Textiles

o Managerial training to encourage adoption of techniques like JIT, Quick

Response Systems

o Promoting hand-made articles by improving quality of raw materials andintroducing machinery where possible in the process so as to maintain standards

of quality and design

o Helping firms build close relationships with customers

o Training centres


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o Improvement of synthetic fibre-base to reap economies of scale, use of genetic

engineering, bio-technology, and cellular biology in both natural and synthetic

fibre-base

Technological Analysis

Textile fairs held every year showcase new technology and development that has taken place in

the industry including weaving, knitting, testing, printing and dyeing.

Technical textiles offer an excellent opportunity not only for the revival of the Indian textile

industry but also a new direction, new ways and means to sustain and thrive in the near future.

An average of 7% growth in technical textiles is expected during the period from 1999-2010. It

is expected to reach US$11 million by year 2010 from US$42 million in 2000.

The structure of the textile industry is extremely complex with the modern, sophisticated andhighly mechanised mill sector on the one hand and the handspinning and handweaving

(handloom) sector on the other. Between the two falls the small-scale powerloom sector. The

latter two are together known as the decentralised sector.

Post-MFA / ATC Scenario

It is generally believed that quota phase-out can only be beneficial for the industry. In 1993, a

study of seven countries found that the price of cotton yarn per kilo, was cheapest in India at

US$ 2.79, compared to US$ 3.30 in Brazil, US$ 4.19 in Japan, and US$ 3.10 in Thailand. This

was because overall labour and raw material costs are cheaper in India.

However, it should be realised that the opposite can also happen. Removal of quotas may open

new frontiers but will also close captive markets. The EU and the US will no longer be

restrained in buying as much as they want from the cheapest possible sources. Some argue that

the ending of quotas will result in cut-throat competition between developing countries. Coupled

with this is erosion in the growth of markets in industrial countries. Apparent consumption of

textile products, in real terms, remained stagnant during the decade 1985-95. Purchases become

discretionary and fashion-driven. As a result, fashion cycles got shorter and order-cycles

compressed. Retailers order requirements on short-order cycle term and demand rapid responses

to in-season ordering. Hence, they are compelled to secure their supplies of top-up orders fromthose in close vicinity.

There is, therefore, a propensity towards sourcing from low-cost countries in the

neighbourhood as also a growth of offshore processing by manufacturers in developed countries.

Regional integration reinforces this.


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Further exporters in India fear that freer imports could lead to dumping of low-cost fabrics from

China and other Southeast Asian countries. Thus, the industry needs restructuring on all fronts.

Although the policy framework can be blamed partially for its ills, internal factors are equally

important.

Recent studies indicate that India is beginning to lose out to its rivals. In one survey of US textile

and apparel imports, China and Hong Kong had higher market shares than India. In certain

categories, other Asian low cost producers like Pakistan and Indonesia had higher market shares

and had emerged as close competitors to India. Because many of these countries depend on

imports, however, India can take advantage ofhome production.

Further, formation of NAFTA means direct competition from the Latin American countries.

The United States has farmed-out offshore processing work to enterprises in Mexico and the

Caribbean Base Initiative countries. Similar relocation has taken place in Europe withmanufacturers shifting base to Eastern Europe, which provides similar advantages of cheap

labour and proximity.

The weakest links in the entire chain are the powerlooms and the processing houses. The latter

especially are very important because they are responsible for the highest value addition in the

manufacturing line. A powerloom co-operative structure could be evolved for pooling of

common services and functions such as quality testing, marketing, short-term financing, etc.

Further, because of the geographical proximity enjoyed, a cluster approach can be adopted.

India has made little attempt to forge partnershipsin equity, technology and distribution in

overseas markets. The newer nuances of global apparel trade demand joint control of brand

positioning, distributing and quality assurance systems.

Areas of Co-operation

Technological upgradation (egs. Effluent treatment plants, energy saving devices, and

other machinery related directly to the production process like spreading, cutting,

finishing, etc.)

Development of textile-specific software for India, Computer-Aided Textile Designing,

aiding IT integration

Usage of EPS (Electronic Point of Sale) software Adoption and adaptation of state-of-the-art information technology in enterprise resource

planning so as to pre-empt non-tariff barriers which curtail markets for the Indian textile

industry

Improvement of synthetic fibre-base to reap economies of scale, use of genetic

engineering, bio-technology, and cellular biology in both natural and synthetic fibre-base


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Growth Drivers

There is huge competition between the manmade fiber industry that cause and provokes

the whole industry to grow in various distinctive products and new technological edge

over each other

Consumer are in always mood of getting a change and always ready to experiment

with new products causing the industry to launch new ideas and put extra effort to

enhance its position in Indian market

Due to increased purchasing power of Indian population, they are able to afford a

newly fresh idea of various products from manmade fibers. Even this causes the regular

research and development in the industry

Legalpanorama is also being loosen on the behalf of textile industry so that the quality

raw material can be easily imported to the nation and better products can be launched

The Value Chain


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The Indian Textile Industry is highly fragmented, with the possible exception of spinning, and is

spread over the entire country. This fragmentation, which is the evolutionary legacy of the

industry, is not all negative. Instead, it is also possibly the industrys strength as it has made it

very flexible and adaptive to changing fashions.

Its strength lies in the manufacture of medium-quality and high fashion ready-made apparel withvalue added work (like embroidery) produced in small lots for niche segments of the domestic

and export markets.

Ready made garments contribute the bulk of the textile exports (approx 45%), followed by

fabrics, made-up?s and yarn. EU and the US are the largest destination for the textile exports

from India. US accounts for around a quarter of textile exports from India, thus making it the

single largest importer of textile goods.

SWOT Analysis

Strength

Abundant raw material availability

Allows the industry to reduce costs and lead times

India is one of the largest producers of natural and man made fibres

Low cost skilled labour

Provides a competitive advantage for the industry

Hourly wage comparison

India0.69

England14.24

Italy15

Japan26

Spain8

Growing domestic market

Low per capita consumption of textiles so lots of scopefor growth.

Global average-6.8 , U.S20 Japan12, India2.8

It is extremely sensitive to fashion trends and fads


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Cases

Arvind mills: increasing its cotton shirting production from 27 million meters to 34

million meters, thus making excellent use of abundant raw materials.

Madura garments: small cities are also getting fashion conscious so MADURAGARMENTS have started setting up exclusive retail outlets in second rung cities like

thanjavur and trichy

Weaknesses

Fragmented industry

o Reduces the ability to expand as few sectors influence the whole industry

o In fabric, large section of the industry is in the power loom and handloom sector.

o Power loom sector- 63%o Handloom sector -19%

o Mill sector -14%

o Hosiery sector- 11%

Historical regulations

Absence of a viable exit option for industry players.

Certain sectors are reserved for SSIs like garmenting and knitting.

Case:Abhishek industry whose major business comes from exports has tied up withforeign firms like Gruppo Zambiati and Nautika to share their technology and R&D

information

Opportunities

Global textile industry is likely to grow from US$ 309 billion to US$ 856 billion by 2014

Market share of India now is only 4% , so huge scope of expansion is present

Indian companies need to increase focus on new products

Increase usage of CAD and Trends forecasting to improve efficiency

Case: Welspun India has ties with 12 of the top 20 retailers in the world namely Wal-Mart,JC

Penny, Target thereby exploiting the opportunities


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Threat

Iincreased competition

Increase in competition due to entry of lower priced imports , who have a better brand

name.

Ecological and social awareness

Issues such as polluting dyes, child labor, unhealthy

Working conditions are in the firing line of the industry.

Standards like SA 8000 are being implemented in the industry, resulting in increased

pressure on the industry

Porters Five Forces Model

1. Threat from new entrants (very low)

Retailing not allowed for foreign players

In case of production of manmade fiber and their retailing, foreign players are yet still not

allowed to retail their products in India because it is already over flown by the excessive

of production and inefficient utilization of the whole manufactured goods and low cost

labor.

Huge investments in infrastructure is requiredFor production of manmade fiber, there is need of huge amount of capable plant with

loads of manufacturing machines and equipments so there is a huge amount of capital is

required that cannot be afforded by everyone.

Availability of skilled labors and technical know-how is low

The skills and technicality needed by the new entrants is not so common and there are

less expertise in this field so very few of the entrants who know all the technical know

hows.

2. Availability of substitutes (high)

Unorganized retailing

Due to unorganized sector of manmade fiber is there, lots of products is being sold at

the background of the industry. That can become a threat to the industry.


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E-retailing

As the electronic media is being at its apex, its use is also very intensified that can be

seen by the deployment of this very thing in transactions of the manmade fiber products

and goods

Catalogue sales

Websites and e-shops are also within this run come as a substitute for the industry and

cause losses to the industry as a whole.

3. Bargaining power of Customers (moderate)

Individually, customers have very little bargaining power

Since the industry being large and huge for the customers because it has a high endcustomers, it not possible bargain much. The orders are most of the time are in bulk so

there are very less chances to get discounted or reduced price

Lots of various shopping formats available to shop from

As mentioned above the various bargaining capabilities are not so successful but still

there are lots of retailing options through which an unrequested price difference can be

found to get a worthy price discount.

4. Bargaining power of suppliers (low)

Being bulk purchases done by organized retailers suppliers have very little bargaining

power in organized retailing.

Many retailers are doing backward integration and coming out with private labels, thus

decreasing dependence on traditional suppliers

5. Competitive rivalry (moderate)

Very few national level players

Growth rate

Presence of regional and local players

High competition between the national brands and retailers own


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Strategic Intent

Purpose of the Strategic Plan

The mandate given to the Ministry of Textiles is to formulate and implement appropriate policies

and programmes for the development of the textile industry, including production and promotionof export of textile and clothings, handlooms, handicrafts, wool and jute products. The main

strategy adopted by the Ministry so far towards achieving the above objectives was to formulate

and implement appropriate development schemes under the Annual Plan and Five Year Plan

framework and also to formulate suitable policies for the growth and development of the textile

sector.

OUTCOME GOALS

Build a strong and vibrant textile industry which is technologically advanced and internationally

competitive.

Incentivise investment in technological upgradation and modernisation through schemes such as

TUFS with enhanced plan allocations.

Generate large scale employment and to improve the availability of skilled man-power for the

entire gamut of the textile industry and to enhance the welfare of artisans, handloom weavers and

textile workers.

ncourage vertical integration and value addition in the industry.

for Welfare Schemes.

Enhance Indias share of global market for textiles.

the export growth rate from the present-

level of 6-10% to 15-20% in the next five years.

To make employment intensive subsectors such as handlooms, handicrafts, sericulture and wool

more vibrant, rewarding for all the stakeholders, rich in quality and design and to preserve

Indias rich cultural heritage in those activities.


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Enhance the textile sectors contribution to Indias GDP, employment and foreign exchange

earnings.

its share in GDP, contribution to employment and export earnings.


25/25

Bibliography

OTC, Compendium of Textile Statistics, Office of Textile Commissioner, Minsitry of Textiles,

Government of India, Mumbai, 2011

FICCI, Trends Analysis of India& Chinas Textiles and Apparel Exports to USA Post MFA,FICCI, New Delhi, July, 2010

Chandra, P., Competitiveness of Indian Textiles & Garment Industry: Some Perspectives, a

presentation, Indian Institute of Management, Ahmedabad, December 2004.

http://www.fibre2fashion.com/industry-article/1/29/indian-textile-industry-brand-strategy6.asp

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Made_Fibersx_New_Attitude.html

http://www.just-style.com/market-research/world-markets-for-technical-textiles-to-

2017_id123038.aspx?lk=sup

http://www.txcindia.com/mill/jars/millrep/otcreportsWeb.htm
http://www.fibre2fashion.com/industry-article/1/29/indian-textile-industry-brand-strategy6.asphttp://www.fibre2fashion.com/industry-article/1/29/indian-textile-industry-brand-strategy6.asphttp://www.textileworld.com/Articles/2008/December_2008/FW/Man-Made_Fibersx_New_Attitude.htmlhttp://www.textileworld.com/Articles/2008/December_2008/FW/Man-Made_Fibersx_New_Attitude.htmlhttp://www.textileworld.com/Articles/2008/December_2008/FW/Man-Made_Fibersx_New_Attitude.htmlhttp://www.just-style.com/market-research/world-markets-for-technical-textiles-to-2017_id123038.aspx?lk=suphttp://www.just-style.com/market-research/world-markets-for-technical-textiles-to-2017_id123038.aspx?lk=suphttp://www.just-style.com/market-research/world-markets-for-technical-textiles-to-2017_id123038.aspx?lk=suphttp://www.txcindia.com/mill/jars/millrep/otcreportsWeb.htmhttp://www.txcindia.com/mill/jars/millrep/otcreportsWeb.htmhttp://www.txcindia.com/mill/jars/millrep/otcreportsWeb.htmhttp://www.just-style.com/market-research/world-markets-for-technical-textiles-to-2017_id123038.aspx?lk=suphttp://www.just-style.com/market-research/world-markets-for-technical-textiles-to-2017_id123038.aspx?lk=suphttp://www.textileworld.com/Articles/2008/December_2008/FW/Man-Made_Fibersx_New_Attitude.htmlhttp://www.textileworld.com/Articles/2008/December_2008/FW/Man-Made_Fibersx_New_Attitude.htmlhttp://www.fibre2fashion.com/industry-article/1/29/indian-textile-industry-brand-strategy6.asp

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