People And Their Problems

New Delhi, 5 May 2007

India’s Export Potential

BOOM AHEAD OF TEXTILE SECTOR

By Radhakrishna Rao

The booming south Indian textile town of Tirupur, described as the knitwear capital of India, touched a whopping Rs.11,000-crore mark through the export of textile products and knitwear during 2006-07.Of course, the elimination of the multi-fibre quota provided a strong opportunity for the  Indian textile industry in general and Tirupur’s knitwear industry in particular to boost their presence in the multi-billion dollar global textile market currently dominated by China.

Studies carried out by the World Trade Organisation (WTO) goes to show that since the abolition of the quota regime, export of textile from India has grown by 14% and garments by 33%. Because India happens to be the world’s third largest producer of cotton and the second largest producer of cotton yarn and textile, it is all set to play a significant role in the global   textile market in the years ahead.

All said and done, there is a growing realization in the Indian textile sector  that to sustain  country’s surging  textile export ,  textile companies and production units make  vigorous exports  to upgrade the technology and improve  quality standards in addition to  reducing lead time for the supply while maintaining cost competitiveness. Knitwear industry sources in Tirupur  make it clear that as is widely perceived, India does not need to be scared of China which is a clear leader in the global textile market. “They (China) have their strength but we are also ramping up our operations and can hold on our own”, says Chandra of Eastman Exports of Tirupur. He drives home the point that over the last two years, Indian exporters have crunched their turn around time quite dramatically.

As it is, not long ago, the time lag between bagging an order and executing it used to be a few months. But now it is less than six weeks. Moreover, Indian textile industry is willing to accept order for a few thousand pieces and also equipped to take small orders for custom made items. On the other hand, the minimum order size for the Chinese textile industry is 50,000. “The consolidation of knitwear firms and the process of corporatization are being varied out seriously as retailers in the European Union (EU) and USA prefer to source directly from the producers. We are consolidating our individual entities of production and operation into a single unit to achieve the much needed size essential to meet the market challenges” says a spokesman of Tirupur knitwear industry.

The setting up of Netaji Apparel Park on a stretch of 220 acres on the outskirts of Tirupur has given a much needed boost to the textile export from Tirupur. The park which houses more than 60 units is a joint venture between AEPC (Apparel Export Promotion Council) and TEA (Tirupur Exporters Association). Textile companies and knit wear units based in Tirupur, in keeping with the trend in the Indian textile industry, are moving up the value chain by either building or buying brands.

Of late, Indian exporters have started making it big in the markets such as Spain and Italy where exporters have been able to corner a large share of niche, high quality orders, coming in mainly from the fashion industry. This success is due to the fact that in the area of ethnic garments and high quality fashion textile products, India has a clear cut edge over China. Yet another plus point of the fast growing Indian textile venture is the modest success of the trendy garments, designed by the Indian fashion creators for the high end West European market. In an interesting development, the Indian handloom products known for their gorgeous colours and shades, as well as rich design and excellent finish, are slowly finding favour with a section of the high end buyers in West Europe and North America .But India’s share in the global textile market is just one-fourth of that enjoyed by China.

However, the resurgent Indian textile industry which happens to be the biggest job provider after agriculture is hopeful of notching up an export revenue of US $450-billion by 2010.India’s Commerce and Textile Ministries are also quite bullish on the long term growth prospects f textile exports. The Indian textile industry sources say that a number of small export oriented textile mills are augmenting their production facilities with a view to corner a larger share of the global textile market.

According to the Union Textiles Secretary, despite infrastructural hitches, the Indian textile sector has been witnessing growth and has the resources to outsmart China in the global market .The Government is concerned and wants improvements in infrastructure., says the Secretary.

As things stand, the Indian textile industry occupies a significant position in the Indian economy and accounts for 14% of the total industrial production in the country. India is the largest exporter producer of cotton yarn. Further, India’s spinning facility is the world’s largest with quality and cost effective production infrastructure. However, the trump card of the Indian textile industry is a strong raw materials supply base, supported by skilled labour force. The industry which is multi fibre based using cotton, jute, wool, silk and synthetic fibres, accounts for 4% of the GDP and 22% of the foreign exchange earned by India.

But the weak point of the Indian textile industry is the fragmented nature  of operations with the result that the small textile companies fail to make it big in the price sensitive market .Besides the size related pricing disadvantage, the Indian textile industry operates through  a large number of facilities, resulting in the loss of operational efficiency and cost advantage.

On another front, the skyrocketing oil prices could eat into the profitability for Indian textile mills. For major fibre intermediaries are derived from petroleum products such as Naptha.

The Indian apparel sector boasts of more than 27,000 manufacturers, 48,000 fabricators and around 1.000 manufacturers cum exporters .With a view to boost their export order, many big textile companies in India are making heavy investment in technology up-gradation and augmentation o f production facilities. ”Everybody is investing in capacity. We cannot expect to gain all of a sudden but it will be positive”, says an Indian textile industry analyst.---INFA

 (Copyright, India News and Feature Alliance)

People And Their Problems

New Delhi, 5 May 2007

India’s Export Potential

BOOM AHEAD OF TEXTILE SECTOR

By Radhakrishna Rao

The booming south Indian textile town of Tirupur, described as the knitwear capital of India, touched a whopping Rs.11,000-crore mark through the export of textile products and knitwear during 2006-07.Of course, the elimination of the multi-fibre quota provided a strong opportunity for the  Indian textile industry in general and Tirupur’s knitwear industry in particular to boost their presence in the multi-billion dollar global textile market currently dominated by China.

Studies carried out by the World Trade Organisation (WTO) goes to show that since the abolition of the quota regime, export of textile from India has grown by 14% and garments by 33%. Because India happens to be the world’s third largest producer of cotton and the second largest producer of cotton yarn and textile, it is all set to play a significant role in the global   textile market in the years ahead.

All said and done, there is a growing realization in the Indian textile sector  that to sustain  country’s surging  textile export ,  textile companies and production units make  vigorous exports  to upgrade the technology and improve  quality standards in addition to  reducing lead time for the supply while maintaining cost competitiveness. Knitwear industry sources in Tirupur  make it clear that as is widely perceived, India does not need to be scared of China which is a clear leader in the global textile market. “They (China) have their strength but we are also ramping up our operations and can hold on our own”, says Chandra of Eastman Exports of Tirupur. He drives home the point that over the last two years, Indian exporters have crunched their turn around time quite dramatically.

As it is, not long ago, the time lag between bagging an order and executing it used to be a few months. But now it is less than six weeks. Moreover, Indian textile industry is willing to accept order for a few thousand pieces and also equipped to take small orders for custom made items. On the other hand, the minimum order size for the Chinese textile industry is 50,000. “The consolidation of knitwear firms and the process of corporatization are being varied out seriously as retailers in the European Union (EU) and USA prefer to source directly from the producers. We are consolidating our individual entities of production and operation into a single unit to achieve the much needed size essential to meet the market challenges” says a spokesman of Tirupur knitwear industry.

The setting up of Netaji Apparel Park on a stretch of 220 acres on the outskirts of Tirupur has given a much needed boost to the textile export from Tirupur. The park which houses more than 60 units is a joint venture between AEPC (Apparel Export Promotion Council) and TEA (Tirupur Exporters Association). Textile companies and knit wear units based in Tirupur, in keeping with the trend in the Indian textile industry, are moving up the value chain by either building or buying brands.

Of late, Indian exporters have started making it big in the markets such as Spain and Italy where exporters have been able to corner a large share of niche, high quality orders, coming in mainly from the fashion industry. This success is due to the fact that in the area of ethnic garments and high quality fashion textile products, India has a clear cut edge over China. Yet another plus point of the fast growing Indian textile venture is the modest success of the trendy garments, designed by the Indian fashion creators for the high end West European market. In an interesting development, the Indian handloom products known for their gorgeous colours and shades, as well as rich design and excellent finish, are slowly finding favour with a section of the high end buyers in West Europe and North America .But India’s share in the global textile market is just one-fourth of that enjoyed by China.

However, the resurgent Indian textile industry which happens to be the biggest job provider after agriculture is hopeful of notching up an export revenue of US $450-billion by 2010.India’s Commerce and Textile Ministries are also quite bullish on the long term growth prospects f textile exports. The Indian textile industry sources say that a number of small export oriented textile mills are augmenting their production facilities with a view to corner a larger share of the global textile market.

According to the Union Textiles Secretary, despite infrastructural hitches, the Indian textile sector has been witnessing growth and has the resources to outsmart China in the global market .The Government is concerned and wants improvements in infrastructure., says the Secretary.

As things stand, the Indian textile industry occupies a significant position in the Indian economy and accounts for 14% of the total industrial production in the country. India is the largest exporter producer of cotton yarn. Further, India’s spinning facility is the world’s largest with quality and cost effective production infrastructure. However, the trump card of the Indian textile industry is a strong raw materials supply base, supported by skilled labour force. The industry which is multi fibre based using cotton, jute, wool, silk and synthetic fibres, accounts for 4% of the GDP and 22% of the foreign exchange earned by India.

But the weak point of the Indian textile industry is the fragmented nature  of operations with the result that the small textile companies fail to make it big in the price sensitive market .Besides the size related pricing disadvantage, the Indian textile industry operates through  a large number of facilities, resulting in the loss of operational efficiency and cost advantage.

On another front, the skyrocketing oil prices could eat into the profitability for Indian textile mills. For major fibre intermediaries are derived from petroleum products such as Naptha.

The Indian apparel sector boasts of more than 27,000 manufacturers, 48,000 fabricators and around 1.000 manufacturers cum exporters .With a view to boost their export order, many big textile companies in India are making heavy investment in technology up-gradation and augmentation o f production facilities. ”Everybody is investing in capacity. We cannot expect to gain all of a sudden but it will be positive”, says an Indian textile industry analyst.---INFA

 (Copyright, India News and Feature Alliance)

New Delhi, 28 April 2007

India’s Tea Industry

FUNDS FLOW SHOULD GENERATE ENTHUSIASM

By Dhurjati Mukherjee

A proposal mooted by a Chinese visiting delegation last year to set up an Asian tea confederation comprising India, China and Sri Lanka has received great appreciation in all quarters. The Indian tea industry is of the view that such a confederation would facilitate smooth marketing of the tea produced in the three Asian countries in the international market, without harming each others’ trading interest. In fact, it is felt that such an alliance would greatly help to dictate prices and put a check to the monopoly of tea trade by the Western multinationals.

The Indian Tea Board has also been receptive to the idea, though it remains to be seen when the confederation actually comes into being. However, there is need for further discussions between the three parties before the details of operation are finalised. This apart, certain other developments should bring cheer to the tea industry here. The Government has recently cleared the decks for a long-standing demand of Rs 4700- crore long-term Special Purpose Tea Fund (SPTF). This is for uprooting-replanting and rejuvenation-pruning spread over 15 years to revive ageing plantations and is expected to help 1800 gardens and about 800 owners, facing problems of low productivity and old plantations.

Twenty-five per cent of the sum would be subsidy by the Centre, another 25 per cent matching contribution of the growers and the rest long-term soft loans. It is understood that loans would be payable in eight equal instalments from the sixth year of sanction, with a five-year moratorium on the payment of principal. An initial contribution of Rs 100 crore was announced in the Budget 2006.

The Finance Minister had said that this amount would be followed by levelised contribution from the Centre every year, which would obviously benefit Assam, Bengal Tamil Nadu and Kerala. Around 74 per cent or Rs 3523 crore has been allocated to Assam and Bengal, with the latter getting Rs 1333 crores and the former Rs 2190 crores. There is unanimous appreciation of the government’s commitment to the proposed fund, which would help the tea industry to raise resources from banks and financial institutions and help improve production and quality.

Meanwhile, the 400 applications have been received from North Bengal, Kerala and Tamil Nadu. In this regard, the first round of signing of loan agreement between 100 tea garden owners would take place on June 25. The Eleventh Plan would focus on the SPTF to improve productivity, which suffers as 38 per cent of the area under plantation has bushes more than 50 years old.  After a five-year cycle of rejuvenation, the productivity should go up between 30 and 50 per cent, according to Jairam Ramesh, the minister of state for commerce and industry.  

Orthodox Production

There would also be a perceptible change in production strategy as the government has decided to increase orthodox tea production from the current 80 million tons to 120 million tons in the next five years to capture the growing tea market in this area. Incidentally, Ramesh indicated at a seminar recently that the Russian market, which has been a prime export destination for Indian tea, has shown its inclination towards consuming more orthodox tea instead of CTC.

The Tea Board had estimated that about 500 million kg could additionally be produced if one were to bring the yield of each of the gardens at par with the highest yield of the respective district. It would be necessary for the managers of the low-yielding gardens to visualize their operational responsibilities in terms of individual factors of production such as land management, soil management, nutrition management and water management and not merely in the traditional terms of estate management.

For increasing production of such uneconomic tea areas, rejuvenation and infilling offer the best medium-term remedies. Infilling can double the output per hectare and, considering an average vacancy of 20 per cent in 421,000 hectares in the country with double infill, the new bush population after eight years or so could be 40:80 i.e. 1:2. While expansion of area may be another option for production growth, availability of land has become a big problem. In fact, whatever expansion that has taken place in recent times has mainly been in the North Eastern parts of the country.

A favourable development last year for our tea industry was the widespread drought reported from Kenya. While India has for some years faced tough competition from Sri Lanka and Kenya because of their competitive prices, now is the turn for us to reduce our costs of production by increasing yield per hectare and make our presence felt in the international market. It may be mentioned here that the cost of tea production in India is the highest in the world and stands at $ 1.7 per hectare while it is as low as 0.58 in Indonesia. Though Indian tea is synonymous with quality tea, even then the costs have to be reduced to a certain extent to compete favourably in the international market.

Increasing Costs

 But the question arises whether all these developments will be able to effectively tackle the crisis in the tea industry where increasing costs of production and the inability to boost up exports have been major impediments. Labour costs have gone up by Rs17 per man-day since 1998 without any productivity norm being enforced. Other costs traveling northwards since 1998 are electricity by around 170 per cent (till 2003), petroleum products and other chemicals and fertilizers by over 60 per cent, which along with labour wage increase, have pushed up garden costs by around 70 to 75 per cent. Industry estimates reveal that the average man-day in a conventional tea garden produces only 1.2 kilograms of tea, among the lowest in the world that puts India at a competitive disadvantage against other tea producing nations.

The all India auction average came down from Rs 76.43 to Rs 55.43 between 1998 and 2002 with export price realization down by Rs 25 per kilogram. However the number of estates went up from 88,000 tea gardens producing 870 million kgs in 1998 to 115,250 tea gardens claiming to have produced 820-830 million kgs between 2002 and 2004. The drop of yield per hectare from 1995 kgs. to around 1580 kgs is indicative of the reduced demand as also of the state of the small growers whose production does not figure in the official list.

The total yield as per current productivity norms should be around 1000 million kgs. But in reality it is much less. The official figures do not reflect the output from the bought tea leaves or the tea waste being recycled with good teas to help flood the domestic market with strong teas. The government loses revenue and the industry does not have any authentic basis for its calculations as something around 150 million kgs are missing from official figures.

That production costs have to be brought down by resorting to mechanization cannot be doubted. Incidentally at $ 1.62 per kg, the Indian cost of tea production is highest among its other competitors. According to a study by the Indian Tea Board, the cost of production of tea in Sri Lanka is at $1.23, Kenya at $1.16, Vietnam at $0.96, Malaysia at $0.84 while Indonesia is the cheapest at $0.58.

An inter-ministerial group of the previous NDA government, comprising the finance, commerce and labour ministries had decided that the Centre would bear 40 per cent of the social cost and the state government would chip in 10 per cent though nothing has been done as yet. The social cost in north India was estimated at Rs 459.97 crores which is about Rs 7.17 per kg of made tea while in south India it was Rs 132 crores which is Rs 3.06 per kg of made tea. The group had also rightly suggested that the tea producing states review the high agricultural income tax imposed on the industry and rationalize the enactments keeping in view the financial health of the plantation sector. But not much headway has yet been made in this direction.

According to the group, it also asked the state governments to review the Plantation Labour Act and link wages with productivity. There is need to seriously think in this direction as these may help bring down costs to a considerable extent.

The other area of attention would obviously be an export thrust. The Tea Board and the Centre would also have a crucial role to play in undertaking promotional campaigns to boost up exports. In the search for new and emerging markets, aggressive promotional strategy would be needed. If necessary, big companies like Tata Tea, Hindustan Lever and the like may be roped in and a viable plan of action formulated to promote Indian tea in some specific markets of the Middle East and also Pakistan.

A point that cannot be denied is that the Tea Board has initially failed in promoting Indian tea in the unexplored markets and highlighting the beneficial aspects of drinking quality tea. A sustained campaign against cheap teas of Kenya and Sri Lanka may have to be launched along with the awareness of the medicinal values of tea on human health. It is only in recent years that the Tea Research Association (TRA) has undertaken research on the beneficial aspects of drinking quality tea and this has to be popularized in India and abroad.

Even in an otherwise dull scenario there is no reason to believe that exports cannot be substantially increased though, of course, the demands of the specific markets have to be kept into consideration. A modest export of around 180 million kgs should not be difficult to achieve if the industry and the Tea Board put in sincere efforts jointly. Meanwhile with Pakistan reducing duty and sales tax on imported tea, India can now hope to export around 20-25 million kgs to its neighbour (against around 15 million kgs in 2006).

Among other measures being contemplated by the Government is bringing more transparency in tea marketing in the country so as to enable radical improvements in the system and attract producers to trade through these centres. The Tea board is also going to set up auction centers at Jorhat and Dibrugarh in Upper Assam and these centres could act as satellite units of Guwahati Tea Auction Centre.

 Future Strategy

Competitiveness and reducing costs of production have to be important aspects of the future strategy. High-yielding varieties of seeds, which are being developed by the TRA and the UPASI Tea Institute, have to be put to use for which loans and grants have to be made available, specially for small growers. Modernization of the factory and giving more emphasis to orthodox production, keeping an eye on exports would be needed as early as possible. Moreover because of high costs of labour, mechanization in farm operations and also in the factory may help in bringing down costs. Another aspect, which has to be kept in mind, is the reduction in the use of chemicals and pesticides as the Western countries have been showing their preference for buying organic tea.

The coming decades is undoubtedly a big challenge for the Indian tea industry as determined efforts have to be made to boost up productivity through biological innovations, on the one hand, and break the monopoly of the MNCs in the realm of exports, on the other. The Rs 6000 crores industry with dollar earnings of around Rs 1800 crores spread over several states in the North-East and South and directly employing 1.1 million people in the country’s remotest regions (and indirectly another nine million) will have to be revived at any cost. Apart from the economic aspect for the industry’s growth and development in a sector where India was once a world leader, the social dimension is no less important.

Keeping such a labour-intensive industry vibrant is imperative at this juncture when unemployment and underemployment is a big problem and extremist activities are rampant in Assam and the North-East. With employment generation being a thrust of the present government’s development strategy and the SPTF expected to generate employment of 22 million person days, an industry like tea that is labour-intensive has rightly been accorded priority and all efforts have to be geared now for its revival and growth. Thus it is necessary that the present Fund would accelerate the process of evolving a realistic time-bound plan of action with the industry leaders taking the lead, keeping in view the interests of the big growers as also of their smaller counterparts, who are possibly the worst hit and struggling for survival.---INFA

(Copyright, India News and Feature Alliance)

PEOPLE AND THEIR PROBLEMS

New Delhi, 21 April, 2007

Alert Decades In Advance

WATER CRISIS TO HIT DEVELOPMENT

By Radhakrishna Rao

An assessment by John R.Wood, Prof Emeritus at the University of British Columbia in Vancouver points out that in another four decades India’s population growth will lead to a serious water crisis…” Even if every available river and stream is harnessed to full potential, by 2045 the Indian population will exceed the availability of water needed to support it. I am sure there will be technological feats. But this is not just a technological problem, not just an economic problem, not even a social problem. It is a political problem. And until political skills are developed or recognized to deal with this problem, there will be more and more conflicts” said Wood. Of course, he was referring to the river water disputes between the various Indian States and conflicts in the community over the limited availability of water.

Meanwhile, a report from the WWF (Worldwide Fund for Nature) brackets the Ganga and Indus with eight other rivers from across the world, which are threatened with over extraction, climate change, pollution and dam construction. “Poor planning and inadequate protection of natural areas mean that we can no longer assume that water will flow forever” said the WWF report entitled “World’s Ten Rivers at Risk”. In particular, the study stated that Ganga is facing a serious threat owing to the increased withdrawal of its rapidly dwindling water.

“ ..In India, the barrages control all the tributaries to the Ganga and divert roughly 60% of the flow to large-scale irrigation. Over extraction for agriculture in the Ganga has caused reduction in the surface water resources, increased dependence on ground water, loss of water-based livelihood  and destruction of habitate of 109 fish varieties and other aquatic and amphibian fauna. Significantly, the much-talked of Gang Action Plan which saw the investment of a whopping Rs.20,000 by the Central Pollution Control Board has not helped in minimizing the pollution  in the river and restoring its water level.

Interestingly, the WWF report also states that “fresh water crisis is bigger than the 10 rivers listed in the report but it mirrors the extent to which unabated development is jeopardizing nature’s ability to meet our growing demands. We must change our mindset or pay the price in the not so distant a future”.

In fact, fetching water after trudging a long distance is a back-breaking and arduous routine for a large segment of the Indian population. Even in the villages of Garhwal region of Uttarakhand which lie in the lap of the mighty Himalayas, women and children walk an average six km a day to get water. Indeed, for the women and children of Garhwal from where a large majority of men-folk have migrated to the plains of North India in search of livelihood, water fetching has become a daunting task. In addition to exerting a negative impact on the health of women and children, this trend also implies diversion and time and energy that would have gone into productive activities for water collection.

In addition, the contaminated and polluted water is a major source of disease and death in India and other parts of the third world. Significantly, only 15 per cent of India’s rural people have access to toilets and sanitary facilities .For lack of sanitary facilities is a major contributor to the contamination of water in many parts of India. Water Aid, a well-known international NGO (Non Government Organisation) in association with local partners has helped develop sanitary infrastructure in slum settlements spread across the country.

Water resources experts state that the mushrooming of bore wells have exerted negative impact on the water table in many regions of the country. Indeed, studies carried out by various agencies go to show that in the past 35 years, the water table has come down by as much as 30-60 metres in several parts of India .In particular, the green revolution state of Punjab has witnessed the decline in water table by around 30 metres on account of the sinking of more than a million tube- wells.  At this rate, the Washington-based think tank World Watch Institute warns that underground aquifers in India could go dry by 2025.

On the other hand, in the coastal state of Gujarat, sea water incursion and increase in salinity level in several areas of the State have made water unfit for human consumption. Studies by  (International Water Management Institute) (IWMI) points out that a large part of western and peninsular India is all set to face serious water crisis in the coming 25 years.

Against this backdrop, water resources experts have stressed on the scientific and sustainable use of water, a renewable but not inexhaustible natural resource, to ward off a threat of water crisis .They say that society and individuals should ensure that water is used in a thoughtful manner and water sources are insulated against pollution and contamination. Moreover, to help increase the food output required to feed a fast growing population, water conservation assumes vital importance for the very survival of humanity.

India, being an essentially agrarian country, depends to a large extent on water for food production and economic development. Clearly and apparently India’s rural populace consumes water mainly for two purposes: domestic use and farming .As environmentalists point out, these two aspects have a direct bearing on the conservation of  water  and  considering it as a finite resources it should be conserved for future.

While some areas in the country are blessed with  abundant water , certain regions  are deficient in this vital natural resource .The variation in spade and time in the availability of water in the different regions of the country has created what is called as food drought flood syndrome with some area facing acute  water shortage and others suffering  flood damages .For long water resources experts have been highlighting the need for public private partnership for conservation of water resources with a focus on rivers  and lakes.

Meanwhile, there is a perception that India does not need to be a water-stressed country. For by harvesting flood water and wasted rain water, India could easily tide over its water crisis. In this context, B.S.Bhavanishankar, a noted water resources expert advocates a total shift from surface irrigation to the one based on ground water for northern plains of the country. For his view is that the entire Gangetic plain is one of the largest aquifer plains in the world and as such with plenty of fresh water available ,the idea of building dams and large canals could be done away with.

However, right at the moment, for millions of poor in the urban areas of India, collecting water from public taps and tankers has become a part of the   routine grinding realilty. For in most cities and towns, the urban water supply is limited to a few hours a day with those settled in slums and shanty towns being left out of the scope of this public water supply scheme. With the population growing at a fast pace, the water crisis is bound to become a serious national problem. –INFA

(Copyright, India News & Feature Alliance)