EMERGENCE AND FALL OF THE COIMBATORE TEXTILE INDUSTRY

Submitted by S.DOMINIC FELIX GAURAV PALLE REVATHI. C Submitted to DR. V.A VIJAYARAGAVAN

MADRAS SCHOOL OF SOCIAL WORK,

(AUTONOMOUS) EGMORE, CHENNAI 600 008. [Affiliated to the University of Madras] 2014

INTRODUCTION
Coimbatore is well known for its textile industries, engineering firms, automobile parts manufacturers, health care facilities, educational institutions and pleasant weather. It is the second largest city in Tamil Nadu and one of the fastest growing cities in India situated near foothills of Nilgiris. Coimbatore is known as Manchester of South India. Now, most of the Indian Software companies have started their development centers in Coimbatore. 76% of India's total textile market is from Erode (Tex-City or Loom-City of India) and 56% of knitwear exports come from Tirupur. But all these are now threatening to come apart, courtesy a series of adverse developments that have converged into a deadly cocktail during the last decade or so. That the industry is today in a state of flux is an understatement at best.

PRESENT POSITION:
At present, cotton textile industry is largest organised modem industry of India. There has been a phenomenal growth of this industry during the last four decades. About 16 per cent of the industrial capital and over 20 per cent of the industrial labour of the country is engaged in this industry. The total employment in this industry is well over 15 million workers. There are at present 1,719 textile mills in the country, out of which 188 mills are in public sector, 147 in cooperative sector and 1,384 in private sector. About three-fourths were spinning mills and the remaining one-fourth composite mills. Apart from the mill sector, there are several thousand small factories comprising 5 to 10 looms. Some of them have just one loom. These are based on conventional handloom in the form of cottage industry and comprise decentralised sector of this industry. Table 27.4 shows that the constitution of decentralized sector is much more than the organized sector. It has increased rapidly from a mere 19.31 per cent in 1950-51 to 58.96 per cent in 198081 and made a sudden jump to 87.95 per cent in 1990-91. It gradually improved during the first half of 1990s and stood at 94.63 per cent in 2003-04.

EMERGENCE OF COIMBATORE TEXTILE INDUSTRY

India held world monopoly in the manufacturing of cotton textiles for about 3,000 years from about B.C. 1500 to A.D. 1500. In the middle ages, Indian cotton textile products were in great demand in the Eastern and European markets. The muslins of Dhaka, chintzes of Masulipatnam, calicos of Calicut, baftas of Cambay and gold-wrought cotton piece goods of Burhanpur, Surat and Vadodara acquired a worldwide celebrity by virtue of their quality and design. This industry could not survive in the face of strong competition from the modern mill industry of Britain which provided cheap and better goods as a result of Industrial Revolution in that country. Moreover, the British textile industry enjoyed political advantage at that time. The first modem cotton textile mill was set up in 1818 at Fort Glaster near Kolkata. But this mill could not survive and had to be closed down. The firat successful modem cotton textile mill was established in Mumbai in 1854 by a local Parsi entrepreneur C.N. Dewar. Shahpur mill in 1861 and Calico mill in 1863 at Ahmedabad were other landmarks in the development of Indian cotton textile industry. The real expansion of cotton textile industry took place in 1870s. By 1875 -76 the number of mills rose to 47 of which over 60 per cent were located in Mumbai city alone. The industry continued to progress till the outbreak of the First World War in 1914. The total number of mills reached 271 providing employment to about 2.6 lakh persons. The First World War, the Swadeshi Movement and the grant of fiscal protection favoured the growth of this industry at a rapid pace. Demand for cloth during the Second World War led to further progress of the industry. Consequently, the number of mills increased from 334 in 1926 to 389 in 1939 and 417 in 1945. Production of cloth also increased from 4,012 million yards in 1939-40 to 4,726 million yards in 1945-46. The industry suffered a serious setback in 1947 when most of the long staple cotton growing areas went to Pakistan as a result of partition. However, most of the cotton mills

remained in India. Under such circumstances, India faced a severe crisis of obtaining raw cotton. The country had, therefore, to resort to large-scale imports of long staple cotton which was an extremely difficult task in view of the limited foreign exchange reserves. The only solution to this problem was to increase hectare-age and production of long staple cotton within the country. This goal was achieved to a great extent in the post partition era.

PROBLEM FACED BY THE TEXTILE INDUSTRY The cotton textile industry is reeling under manifold problems. The major problems are the following: Sickness: Sickness is widespread in the cotton textile industry. After the engineering industry, the cotton textile industry has the highest incidence of sickness. As many as 125 sick units have been taken over by the Central Government. Sickness is caused by various reasons like the problems mentioned below. Obsolescence: The plant and machinery and technology employed by a number of units are obsolete. The need today is to make the industry technologically up-to-date rather than expand capacity as such. This need was foreseen quite sometime back and schemes for modernisation of textile industry had been introduced. The soft loan scheme was introduced a few years back and some units were able to take advantage of the scheme and modernise their equipment. However, the problem has not been fully tackled and it is of utmost importance that the whole industry is technologically updated. Not many companies would be able to find resources internally and will have to depend on financial institutions and other sources. Government Regulations: Government regulations like the obligation to produced controlled cloth are against the interest of the industry. During the last two decades the excessive regulations exercised by the government on the mill sector has promoted inefficiency in both production and management. This has also resulted in a colossal

waste of raw materials and productive facilities. For example, the mills are not allowed to use filament yarn in warp in order to protect the interest of art silk and powerloom sector which use this yarn to cater to the affluent section of society. Low Yield and Fluctuation of Cotton Output: The cotton yield per hectare of land is very low in India. This results in high cost and price. Further, being largely dependent on the climatic factors, the total raw cotton production is subject to wide fluctuation causing serious problems for the mills in respect of the supply of this vital raw material. Competition from Man-made Fibres: One of the serious challenges facing the cotton textile industry is the competition from the man- made fibres and synthetics. These textures are gradually replacing cotton textiles. This substitution has in fact been supported by a number of people on the ground that it is not possible to increase substantially the raw cotton production without affecting other crops particularly food crops. Labour Problems: The cotton textile industry is frequently plagued by labour problems. The very long strike of the textile workers of Bombay caused losses amounting to millions of rupees not only to the workers and industry but also to the nation in terms of excise and other taxes and exports. Accumulation of Stock: At times the industry faces the problems of very low off take of stocks resulting in accumulation of huge stocks. The situation leads to price cuts and the like leading to loss or low profits.

FREIGHT COSTS The first issue has to do with the raw material cotton itself. Some 60-70 per cent of the State's requirement is procured from Gujarat and Maharashtra, with Andhra Pradesh and Karnataka contributing smaller volumes. Till recently, sourcing cotton from outside or its pricing wasn't really an impediment.

However, consequent to the unusual increase in diesel prices in the last few years, the cost of transporting cotton from upcountry destinations has become unviable, especially for mills in the interior pockets of Tamil Nadu. Today, mills in competing countries, such as China and Bangladesh, are able to haul Indian cotton in vessels through the sea route at less than a quarter of what it costs mills located in Tamil Nadu or even in other major spinning clusters in the country. Detailed freight cost calculations for transporting cotton from Rajkot in Gujarat to a port in China via Mundra (inclusive of port handling charges) puts its at around Rs 1.34 a kg. This is as compared with Rs 4 for moving the fibre from Rajkot to Namakkal by road. The freight advantage has enabled China and Bangladesh to derive a huge competitive edge compared to the industry in Tamil Nadu (and much of India) in sourcing the cotton that is grown in India itself! It has led to mills here impressing upon the Government the need to levy a freight equalisation tax of at least Rs 2,500 a tonne on cotton exports, to set off what it considers as an unfair freight advantage. Tamil Nadu mills now incur Rs 4-5 a kg for bringing and unloading cotton from Gujarat and Maharashtra. Ironically, this cotton that is spun into yarn by the mills is then sent back as yarn for weaving into cloth by powerlooms in Bhiwandi or Ichalkaranji in Maharashtra. It means spending an equal amount again on transporting processed cotton back to the States from where the white fibre was originally produced. That raises the question: What stops Tamil Nadu from producing its own cotton, considering that the yarn from the huge spinning capacities of its mills cannot be entirely consumed within the State? VALUE-ADDED TAX Here, there is the anomaly from the value-added tax (VAT) imposed by the State Government, which has been raised from 4 to 5 per cent. It is a major impediment for cotton development, given that the corresponding central sales tax rate on cotton imported from other States is only 2 per cent.

That makes it cheaper for mills to source cotton from outside, rather than from within Tamil Nadu, which levies a 5 per cent VAT on raw cotton. On top of VAT, there is also a 1 per cent market committee fee on cotton and cotton waste, rendering sourcing of cotton from within the State all the more expensive. But high cotton cost is not the only problem. There are also other chickens coming home to roost now. Mills in the State are losing their competitive advantage in recent times on account of the rising cost and shortages of power as well as skilled labour. Spinning mills in Tamil Nadu are currently facing up to 50 per cent power shortages, which rules out utilisation of capital at the ideal 90 per cent levels. As regards labour, the first aspect concerns wage costs. These have gone up because of general growth in labour demand from other industries as well, plus state welfare schemes from the Mahatma Gandhi National Rural Employment Guarantee Act, besides the provision of super-subsidised grains and other items through fair price shops. The industry, right or wrong, views these as having impacted work culture. RISING WAGES The rural poor are no longer inclined to work just to eke out a bare living, thereby automatically putting upward pressure on the wages required to draw them to the mills. The second aspect relates to skills. Mills today are unable to get skilled workforce, with the skill gap widening at 50-60 per cent. Attrition rates have also increased, and even those with minimal skills are up for grabs. The industry, while contending that it would be meaningless to invest huge sums on training, feels the need, though, to evolve a system for retention of their workforce. Here, there has been a combination of circumstances that have gone against the industry. Some three years ago, the Madras High Court ruled that the State Government has powers to fix minimum wages for apprentices in the textile industry, which, mills say, is peculiar to only Tamil Nadu. These, in turn, come to no less than Rs 250 a day for raw hands, and even at this rate, it isn't easy to get people.

Looking back, it is said that till the early 1990s, the mill worker was a much sought-after groom. Today, though, they are a condemned lot, which people attribute to the policy of de-licensing that led to newer mills springing up in rural areas. The wage bill in these units, mostly around Dindigul, was only 3-5 per cent of their turnover, as opposed to the 12-18 per cent for the established mills in Coimbatore. With time, the latter started to bleed, with manpower costs eating into their profits and forcing a churn. The mills that offered voluntary retirement packages to workers managed to somehow survive, while others had to simply shut down. In the process, the mill worker suffered erosion in both economic and social status. Today, the entire industry is in crisis, with high volatility in cotton and yarn prices; sudden glut in domestic as well as global markets, resulting in huge accumulation of yarn stocks, closure of dyeing units in Tirupur and Karur due to environmental reasons, and acute shortages of power and skilled labour. The spinning sector in Tamil Nadu, which alone employs six lakh workers, has incurred cash losses of more than Rs 7,500 crore in January-September. Since the end of May, for the first time in history, it has gone for a 35 per cent production reduction.

FUTURE:
This Coimbatore city has lot of opportunities because of the cultivation area with sophisticated water facilities, chief land and labour etc. Coimbatore industry has become a tough industry and is experiencing strong cyclicality, persistent pressure across the country overall lessening in price due to overcapacity and huge competition. It has got a good reputation in the global markets, rising SMEs, attracting more FDI, exports etc. Coimbatore is in much better position in manufacturing of consumer, industrial & economical products with good entrepreneurship compared to its other peers/like industrial area of Delhi, Rajkot, Ludhiana, Jalandhar, Ahmadabad etc. Indian textile manufacturing industries are ready to meet the competitive product equal to the price with high speed of sophisticated machine. E-business provides exclusive opportunities

for enterprises to exchange goods and services between domestic as well as foreign countries with lot of FDI, exchange reserves etc. its becoming a preferred IT destination with the city having several software parks, Special Economic Zones, education, health care, and other development centers also, further this city being a gateway to the other states. Coimbatore stock exchange limited is acting as linkages between investors and the textile industry. Recently CII study rated Fourth Investor friendly city in India and its globally competitive for the industry of engineering, auto components, motor pump sets etc. It is facing the challenges such as environmental issues and land pollution, child labour, factory background issues, unexpected loss, volatility on price of raw materials, threat of large scale industry, handling the slowdown etc. Threats such as domestic and international market competition need to improve the working conditions of the people who are involved in this profession and need to revamp consumer realization. Further, this textile region altering as a particular Gounter community oriented owners for these industrial parks, making slaver and creating them as a working community till death. Abhijit&kaivan brought out more than 65% of the Gounders occupying this industry & playing a substantial role of community identity in those region with the help of child labour. Plus he was wrongly mentioned communal investment is must & helped to function the capital market with their earlier long term performance. This report shows & helps to favourable of particular community people and not to all. Government should stop and encourage other undeveloped people by providing small and medium scale enterprises loans and schemes at different level. Supremacy of the small scale sector having the disjointed structure, shipping cost, high power cost, rising interest rate, transaction cost with distant labour. Further FDI are not coming highly to develop this industry as a good position, even though foreigners are not ready to invest this sector because the reason of meeting the loss continuously by few firm. Indian government is recently turning to avoid the bottlenecks, which delay its development. Whatever may be, in the recent time technology playing a lead role in its processed industry as well as maintaining their quality, with innovative products in the competitive world, at this moment Indian industry are facing this problem highly.