rich-heritage-richer-potential Aug2019

Rich Heritage, Richer Potential: South India’s T&A Industry Scenario

Potential of South Indian Textile and Apparel Industry
India’s textiles and apparel sector is one of the oldest industries in the Indian economy dating back several centuries. The industry still continues to be a major participant of the country’s economic growth in this century. Looking at the foreign trade, India's overall textile and apparel exports during FY 2017-18 stood at US$ 37 billion and are expected to grow to reach US$ 80 billion by 2025. A major contributor to this growth will be and have been the southern states of India i.e. Andhra Pradesh Karnataka, Kerala, Tamil Nadu, and Telangana.

Tamil Nadu: Thalaiva of Textiles
The Southern India in the last century has developed itself into a major textile hub and the Tamil Nadu has been at the forefront to this textiles revolution. The state alone represents roughly 46 per cent of India's entire spinning capacity, 60 per cent of yarn exports, 20 per cent of weaving and 70 per cent of the knitted apparel production capability. The state has four major textile cities which carry the textile onus; Coimbatore, Tirupur, Salem and Erode. These are the contributors in the growth of the Textile Industry in the state.

Coimbatore, an industrial town in the western region of Tamil Nadu is known as the cotton town. It has a flare of cotton production because of its rich black soil which suits cotton growing. The town is also known as the Manchester of South India and manufactures blended and cotton yarns. The spinning industry of Coimbatore is well supported by a strong weaving base. This base consists of some 15-20 large scale weavers including, Akshaya Textiles, Gobald, KPM Textiles, KG Denim, Prime Textiles, Southern Textiles, Hindustan Textiles, Lakshmi mills, Gangotri and Premier.

About 50 km to the east of Coimbatore, the town of Tirupur is known as the knit city and has many cotton ginning units that cater to the main cotton markets of Tamil Nadu. Tirupur contributes more than 45% of knitwear export from India. The products produced by the manufacturing units in Tirupur generally include cardigans, t-shirts, jerseys, undergarments, pullovers, blouses, skirts, sportswear and trousers. These knitwear units form 80% export of the total export from Tirupur. These units are generally large scale units that have vertical integration. The raw material for these units is the yarn manufactured by spinning mills in Coimbatore and the conversion of this yarn to knitted garments all undertaken in the garment manufacturing unit. This type of business model helps manufacturers have a strong hold on the supply chain and make themselves cost effective.

The state is well equipped in almost all the segments of the textile value chain. The historic presence of textile ecosystem in the state although supports further growth and development of textile industry, however, the ageing technology, low availability of trained labour and non-adherence to international compliances tend to inhibit this growth of the industry.

Karnataka: The Apparel Export Cradle of India
Karnataka’s is an all-rounder in the production of textiles and apparel, however, the state is primarily focused on apparel production and contributes 20% to the garment production of the country with presence of over 6,500 units. The state is also responsible for 8% of the national exports in the textile sector and 35% of the country’s raw silk production. The silk exports account for 24% of the silk goods export value at the national level. The state also contributes to 11% of the country’s total wool production and 6% of the cotton production. The industrial production, export earnings, and employment generation has made textiles a key sector in the economy of the state. Karnataka also has an upper hand as many brands have their headquarters situated in the state capital. Apart from this, the state is home to several large garment manufacturing companies including Raymond, Shahi Exports, Gokaldas Exports, Texport Industries, etc.

Karnataka, may not be as well-equipped as Tamil Nadu in all the segments of textile value chain, but the presence of organized players and large scale investments puts it in a strong position among other textile manufacturing states.

Andhra Pradesh: The Budding State
Andhra Pradesh, the sunrise state, is the eighth largest and rapidly urbanizing state of India. The state possesses a large raw material base and is one of the largest producer of cotton and the second largest producer of raw silk .The state also has presence in the entire textile value chain starting from raw material to the manufacturing of apparel. Well-developed ginning and spinning facilities are spread across state which makes it one of the leading producers of cotton (22 lakhs bales) with a 6 per cent share in total production of the country. West Godavari, Krishna, Guntur, Prakasam and Chittoor districts of Andhra Pradesh complete the rest of the value chain with presence of weaving, hosiery and spinning mills. Andhra Pradesh is home to over 145 spinning mills with combined capacity of 3.6 million spindles which accounts for 7% of India’s total spindlage and produces approx. 380 million kg yarn per year.

Even with such a strong raw material base and a well-established spinning industry, the state has an under-established weaving infrastructure with nearly 12,000 operational powerloom units. Moreover, the state does not have major presence in fabric processing and garment manufacturing. The underdevelopment of these segments of the textile value chain can be attributed to the huge exports of the yarn manufactured in the state. The local unavailability of yarn poses a challenge to the industry but the Government support and the industrial growth of the state makes up for it.

There are more than 600 garment manufacturing facilities spread across the state, representing some of the biggest names in the business, such as Shahi Exports, Texport Industries Pvt. Ltd., Gokaldas Exports Ltd., Page Industries, Loyal Textiles, NSL Textiles, Brandix, etc. These facilities are mainly located in Anantapur, Chittoor, Nellore and Vishakhapatnam districts of the state.

Andhra is well equipped in supplying manpower to the industry with 70% of the working population of the state ready to be employed. The state government has also set the minimum wage for garment workers at ~ Rs. 6,300 per month for semi-skilled workers engaged in garment manufacturing in the state. Two of the three deep draft ports of the state, Vishakhapatnam and Gangavaram are around 40 km from the state’s major apparel manufacturing cluster. Due to these factors, in the span of just 5 years, the Andhra’s garment industry has attracted an investment of approximately Rs. 2,000 crores, which is highest among all the other segments of the textile value chain.

Telangana: The New Kid on the Block
After gaining the stature of an independent state in 2014, the newest state of India has placed itself as a major hub for textiles and apparel. Telangana is known for its production of long staple cotton, with an annual production of around 60 lakh bales. However, processing and value addition to cotton in the state is largely limited to ginning and pressing.

The 35 odd spinning mills present in the state that have a capacity of 9.3 lakh spindles consume roughly 10 lakh bales of the total produce. To account for the weaving industry in the state, ~49,000 powerlooms are present in the state. Out of these, ~36,000 powerlooms are concentrated in the industrial town of Sircilla. The state lacks presence of a strong garment manufacturing base which breaks the value chain link.

Outdated weaving technologies, lack of backward and forward linkages, shortage of credit support, dependence on middlemen, absence of product diversification, are some of the common problems. But on the contrary, the availability of raw material and trained manpower native to the state present an opportunity for setting up new businesses in the state.

Kerala: Weavers’ Lost Paradise
Kerala, the God’s own country as it is popularly known, was a major textile producing state in the previous century. With the presence of over 500,000 weavers back in the late 20th century, the state contributed significantly in the country’s weaving prowess, but at present the contribution of the state in India’s textile produce is not significant. Earlier, the weavers in the state were well-supported by the yarn supply from the rich spinning base of Tamil Nadu. However, due to the emergence of powerlooms and development of the Tirupur region, the weavers of Kerala had to give up to the modern technology and consumption pattern. Another reason for the decline of the weaving industry in the state is absence of the entire textile value chain. Moreover, the state lacks a dedicated textiles investment policy that could attract new investment into the state.

The textile and apparel industry in Kerala at the moment is not showing any signs of revival. However, a well-planned textile policy for the state could change the scenario and maybe make manufacturing in the state profitable. Moreover, the state could leverage the presence of textile industries in the other 4 southern states.

Policy Support
Taking all the 5 southern states into consideration, the policy support in southern India for textile and garment manufacturing is very attractive. Both Telangana and Andhra Pradesh have policies that have been widely lauded by industry: The Telangana Textile and Apparel Incentive Scheme 2017 and the Andhra Pradesh Textile and Apparel Policy 2015-20, respectively offer various incentives for establishing new setups. Tamil Nadu also announced an integrated textiles policy in 2019 in order to provide a supportive ecosystem and compete with the factories that are coming up in other states. Karnataka, in its previous policy offered various subsidies and is under the process of introducing a fresh policy in coming months that is expected to offer benefits better than the previous policy.

The Fatal-5 issues of the South Indian Textile Industry
Although these 5 states have a history of manufacturing textiles and apparel, there are a few issues that are persistent and can potentially threat the current growth trend of the industry. These can be broadly categorized into 5 fatal problems as:

1. High labour cost: Textiles industry, especially garment manufacturing is fairly labour intensive. The expenses borne by a company on the muster roll can make or break the profits of the company. Although, most of these states have comparatively low wages, Karnataka in particular has high minimum wages and the fact that the state is primarily into garment manufacturing, makes it a difficult business.
2. Lack of automation: The industry in these states being predominantly old, faces the problem of ageing of technology and lack of automation. A way to tackle high wages is to minimize the human interaction with the manufacturing process. In textile processes, this can be achieved by bringing in newer technologies. However, for garmenting the process is not as straight forward.
3. Lower efficiency levels: An extension of the second problem, lower efficiencies in textiles can be attributed to obsolete technologies and poor quality of raw material. On the other hand, efficiencies in garment manufacturing are a function of the worker efficiencies as well as the process efficiencies. However, the solution to these low efficiencies cannot be brought about by just upgrading the technology being used, but also requires individual skill enhancement and training.
4. Increasing focus towards compliance and sustainability: In order to bring about a change in how ethically the clothing and related products are made, a majority of international buyers have come up with stringent compliance policies that have to be adhered. Since these South Indian states predominantly manufacture for the purpose of exports, a lot of manufacturers need to modify their manufacturing setups to make them compliant in order to cater to international market.
5. Lack of product development: Product design and development is a major aspect of production that most of the manufacturers overlook. Although, the problem is faced by the entire country’s textile and apparel industry, a few of the southern states including Karnataka and Tamil Nadu (Tirupur) are engaged in mainly manufacturing commodity products that lack innovation and product design. This may be part of the business model that the industry is following in these regions, but in a longer run this production model could become unsustainable and result in collapse of the industry

An Engineered Approach: The Way Forward
As captured in the article, the textile and apparel manufacturing industry in southern India is huge and has a rich history associated to it. Ironically, even though the industry here is old, it presents limitless investment opportunities across the value chain, especially in garment manufacturing. Raw material availability and huge installed capacities in ginning, spinning and weaving/knitting, have been identified as the strong suit of these southern states. Also, it has been established that the manufacturing in these states is plagued by a few issues that remain persistent across the manufacturers in the region. Most of the fatal-5 issues are mainly faced by the garment manufacturers of the region. Let us find out how the potential of this huge industry can be tapped by simply improving upon the ways that the garments are being manufactured.

The industry requires factories that are engineered in a way that they minimize their input, maximize their utilisation and realise their profits well; factories that have trained manpower, optimum technology, ideal infrastructure and rationally designed processes. These engineered factories at the moment are almost a rarity in India, let alone South India. An engineered factory is one that is built upon the four pillars i.e. Organization, Technology, Infrastructure and Processes.

An engineered factory should be able to tackle all of the above mentioned fatal-5 issues with ease with its unique features.

1. Low man-to-machine ratio (MMR): A low MMR ratio helps bring down the number of workers/ personnel required by any manufacturing setup to undertake a certain work. An engineered factory develops its processes in such a way that workers are placed in critical positions and the number of workers allocated for non-critical tasks is kept minimum. This reduces the overall manufacturing cost for the organization.
2. Maximum usage of low cost automates and work-aids: An engineered factory adopts the maximum use of automates, wherever required. Automation does not only imply the use of futuristic concepts like industry 4.0, but it can be realised by the use of simple work-aids. The use of such automates and work-aids do not just result in an increase in efficiency, but are also cost effective.
3. Low efficiency levels: The biggest reason for low efficiency in Indian garment manufacturing industry is the lack of appropriately skilled workforce. An engineered factory employs workers that are specially trained for specific tasks for garment manufacturing. Through a skilled work force, a garment manufacturing unit can achieve an increase in overall efficiencies by over 20%. Also, an engineered factory employs the use of lean tools and ideologies like right-first-time (RTF) and quick changeover (QCO), which further give a boost to the efficiency.
4. Compliance: An engineered factory is designed keeping in mind the safety, health and environment compliance norms. Aligning a manufacturing unit along with these norms automatically ensures that the factory adheres to the demands of major international buyers.
5. Competitiveness: An engineered factory leverages all the cost effective measures and techniques to achieve competitiveness. With a cut-to-ship ratio of upto 99% for basic products a company can realise the gains for product development and cater to diversified needs of the buyers.

The way forward for the manufacturers in South India is to take maximum benefit of the textile heritage of the region and combine it with the modern manufacturing techniques and ideologies. This will help develop manufacturing establishments that are capable of competing with other countries and at the same time are capable to fulfil the increasing domestic market demand of India.

This blog has been authored by Ayushi Puri, Consultant and Priyam Pandit, Associate Consultant. The blog also featured in the July 2019 edition of Fibre2Fashion.