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A mini-project in Managerial Communication
Kirthiga Sekar Kirubanand .K Umamaheswaran .M
(08AA19) (08AA20) (08AA43)
Under the guidance of
Ms. K. Srigayathridevi December 2008- January 2009
PSG INSTITUTE OF MANAGEMENT PSG College of Technology (Autonomous and affiliated to the Anna University) Coimbatore - 641014
We thank the Almighty for giving us strength and courage to complete the project We would like to express our deep sense of gratitude and profound thanks to our respected guide Ms. K. Srigayathridevi, Lecturer, PSG Institute of Management, Coimbatore, for her constant support and valuable suggestions during the course of this work. We wish to express our deepest sense of gratitude and thanks to Mr.Sakthivel, President of Tirupur Exporters Association (TEA), owners of various knitting, dyeing and garmenting companies, for providing us valuable information that was very helpful for completing this project. We also extend our sincere thanks to our beloved parents and most of all, our fellow team-mates, for their constant encouragement, prayers, tolerance, patience, support and advice.
TABLE OF CONTENTS
S.No. 1 Introduction
PAGE NO 1 2 2 4 4 5 5 6 7 10 11 14 17 17 17 18 18 20
1.1 Advantages of Cluster Study 1.2 Tirupur As a Cluster 1.3 Principles of Cluster Approach 1.4 Features of Knitwear Industry 1.5 Opportunities in the Textile Cluster 1.6 Garment Outsourcing 1.7 Industry 1.8 Processes involved in the Industry 1.9 Impact on Economy 1.10 History & Background 1.11 Geography 2 3 Objectives of the Study Methodology 3.1 Research Purpose 3.2 Research Strategy 3.3 Research Approach 4 TEA(Tirupur Exporters Association)
4.1 Cluster Development Methodology 4.2 Cluster focused Approach by TEA 4.3 Proactive Role of TEA in Cluster Development 4.4 5 Dependence on Government for Infrastructure Improvement Role of Government in the Cluster 5.1 Cluster Initiatives for Infrastructure Transformation 5.2 Infrastructure Leasing & Financial Services Ltd. (IL & FS) 5.3 Leveraging of Funds 5.4 Institutional Support 5.5 Benefits of Cluster Development Programme 6 Analysis & Interpretation 6.1 Decline in Garment exports by 10% 7 Findings & Conclusion 7.1 Issues to be addressed based on SWOT 7.2 Networking among Firms in Cluster 7.3 Human Resources 7.4 Community and Local Culture of Cluster 7.5 Embeddedness with Locality 7.6 Globalization Factor 7.7 Environmental Issue 8 Current Issues of Concert
21 22 22 24 24 25 25 26 26 27 27 28 33 33 34 34 36 37 37 37 38
Discussions 9.1 Reverse effects of Globalization 9.2 Tax Issues 9.3 Pollution Problem 9.4 Technology Factor 9.5 Employment Law 9.6 Co-ordination among various Government Agencies 9.7 Pending Payment Issues 9.8 Production Policy 9.9 Single Window Policy
43 46 47 47 47 48 48 48 49 49 50
The term ‘cluster’ indicates a sectoral and geographical concentration of enterprises, which produce and sell a range of related products and are, thus, faced with common challenges and opportunities. These clusters have been in existence for decades and sometimes even centuries. India has 388 documented industrial clusters, around 400 handloom clusters, about 3,000 handicraft clusters and 2,800 micro-enterprise clusters that contribute significantly to its economy, and provide employment to more than 20 million people. According to one estimate, clusters account for 77 percent units, 72 per cent employment, 61 percent investment, 59 per cent output and 76 per cent exports of small scale industries. Among the larger clusters, it is worth mentioning those of: Panipat accounting for 75 per cent of the total blankets produced in the country. Tirupur, which is responsible for 80 per cent of the country’s cotton hosiery exports. Agra with 800 registered and 6,000 unregistered small scale units making about 150,000 pairs of shoes per day with a daily production value of $1.3 million and exports worth $60 million per year. Ludhiana, a city that is well known as the Manchester of India, which alone contributes 95 per cent of the country’s woolen knitwear, 85 per cent of the country’s sewing machines and 60 per cent of the nation’s bicycle and bicycle parts. Surat, which cuts and polishes three-quarters of the world’s diamonds in several hundred “factories” employing over 300,000 cutters. What explains and growth of specialized supplier of raw material, component and machinery, sector specific skills etc. It favours the emergence of technical, administrative and services. Historical accidents and financial services create a conducive ground for Externalities development of inter-firm cooperation and also cooperation among public and private institutes to promote local production, innovation and collective learning. Clusters develop in the form of similar enterprises, springing up near each other in a “metoo” fashion, such as cotton knitwear units at Tirupur in Tamil Nadu.
Advantages of Cluster Study
Clusters Provide the Basis for Heterogeneity. Growing Recognition of Cluster Contribution. Provide Basis for Designing & Undertaking Holistic Inter-linked Action at the Local Level. Cluster Approach Identified with Private Sector Driven Model with Govt. as Facilitator. Flavour of the Decade in International Domain.
Tirupur as a Cluster
Tirupur, Tamil Nadu is the Knitwear cluster of India. This cluster is widely recognized as a `dynamic’ cluster with necessary `vertical’ depth, critical mass of enterprises as also appropriate factor conditions. This has helped it to be largely export oriented in terms of over eighty percent of its €1.3 billion a year turnover. The growth of the cluster has been propelled by strong associations. Our interventions emphasized on cluster wide dissemination on several critical areas as also catalyzing several new pursuits.
Tirupur has traditionally manufactured knitwear and had especially established its name in India in the manufacture of cotton undergarments. In the 1970’s, as a result of collaboration with an Italian cluster, Tirupur began to exploit opportunities in the export market. Over the last two decades, Tirupur has emerged as a leading export cluster in knitwear and has established its presence in Europe, US and in the Pacific.
The Tirupur cluster has grown as a highly linked (although informal) cluster of units which together convert cotton to knitwear products. Individual units are highly specialized at the manufacturing of fabric, dyeing, processing, knitting and export marketing. As of date, over 5000 units in Tirupur work in the cluster and achieve an aggregate export volume of over USD 1 billion.
About 45 per cent of India’s garment are in the form of knitwear, and here the Tamil Nadu centre of Tirupur plays a pivotal role, generating as much as 80 per cent of knitted garment exports; in other words, about 4 per cent of India’s total export trade. Known as ‘T-Shirt
City’, the industry in this town started with the production of low valued cotton hosiery items, mainly under garments during the 1930’s. Knitting to this city was brought by Gulam Kadar in 1937 who established “Baby Knitting Industries” in Kaderpet area of Tirupur. The Tirupur cluster comprises around 5,000 units which are involved in one or the other activities. From being the producers of basic knit garments for lower end of the domestic market, Tirupur knitwear cluster has today a diversified production range comprising Tshirts, polo shirts, sportswear, sweat shirts, ladies dresses, children’s garment, nightwear, etc. Knit Fair Complex, logistics, fashion institute in collaboration with NIFT and the like. Among the important ongoing projects being taken up is an apparel park of 65 units in a 175 acre plot.
Principles of Cluster Approach
1. Demand driven i. Demand creation an integral component ii. Bottom-up approach 2. Targeted at intermediaries i. Not individual firms ii. Institutions, consortia, industry associations 3. Flexible i. Wide variety of themes, actors, ideas as per cluster ii. Dynamic and responsive to changing needs
Features of Knitwear Industry
Low cost labour force, sizeable supply of fabric, raw material and spinning and dyeing facilities.
Existence of many associations for the knitwear cluster well connected with each other
TEA (Tirupur Exporters Association) works together with the Government and local companies to ensure better infrastructure and other facilities for the cluster.
Design oriented production – companies investing in design proposals to clients Formation of NIFT TEA FASHION INSTITUTE – school for apparel design set up to help the exporters
Major exports to European brands : Upim, Diesel, Marlboro, Rinascente, Champion, Liberti, C&A, Wallmart, JC Penny, GAP, Mark & Spencers, Sara Lee,Tomy Hilfiger, Karstadt Quell etc
Tirupur garment exports amount to €1.6 billion international market and €454.5 million in the domestic market.
Opportunities in the Textile Sector
Global Textile and apparel trade is estimated to be €340 billion Indian industry estimated at €35 billion with exports of €12 billion and employs 35 million people
India is the third largest producer of cotton, largest exporter of yarn (25% of world cotton yarn export)
India is a major player in the home textile segment (61% of world loom capacity)
Walmart, Levis, Gap, JC Penny, Marks & Spencer, and other foreign labels are buying more and more garments and fabrics from India.
Walmart alone bought €1.6 million in the year 2005 and it intends to increase this to € 2.3 billion in the next year. European giant GAP is also outsourcing apparel from India.
Singapore based Crocodile International has announced its plans to invest an additional €.39 million.
India is also developing design skills that cover different fabrics and different markets.
The Indian silk industry, which is known for its finery and masterly brocades, are also a great strength to the textile industry.
SMEs (Small/Medium-sized Enterprises’) operating in these clusters derive a clear competitive advantage from: The proximity to sources of raw materials. The availability of suitable business development services. The abundance of customers/buyers attracted by the cluster tradition in that industry. The presence of a skilled labor force.
Although Tirupur is a small city compared to Coimbatore, it is the centre of Tamil Nadu's cotton knitwear industry and successfully markets its products in India and overseas. It is one of the fastest growing city in India in terms of Industry. It is called the Knits Capital of India as it caters to famous brands and retailers from all over the world. Nearly every international knitwear brand in the world has a strong production share from Tirupur. It has a wide range of factories which export all types of Knits fabrics and supply garments for Kids, Ladies, Men's garments - both underwear and tops. The city is known for its hosiery exports and provides employment for about 300,000 people. Some of the world's largest retailers including C&A, Wal-Mart, Switcher, Diesel, ARMY, Tommy Hilfiger, M&S, FILA, H&M, HTHP, Whale, Reebok, VALUE, PitStop, 100% import many textiles items and clothing from Tirupur. There are many export Houses in Tirupur successful and fast growing like Eastman Exports , PGC Industries-Prem Durai Exports (Prem Groups), Stallion Garments, Statesman Fashion, Regency Garments, RBR , SCM , SP , Poppys, RF Garments ( Rite Fit garments),UNITED APPARREL. A large market for export reject pieces also exists centered in the khaderpet locality close to the railway station. Even though the city is very prosperous, the infrastructure is very minimal. The city grew very quickly due to the high demand for manufacturing for the popular clothing brands mostly in the U.S. and Europe. But the modern machinery used and the availability of skilled labour, enabled this city to prosper and be competitive internationally. The lack of infrastructure facilities comparatively for the foreign exchange which the city brings is a big negative point to be noticed. The Tirupur Exporters Association (TEA) and other associations are taking actions directly to get some sort of facilities done (like the third water scheme and NAP). Tirupur is also known for its companies which have achieved major certificates and is showing an average growth of 40% per year since 1990.
The association formed by Exporters of Tirupur (TEA) is one of the most successful association in India trying hard and been successful in helping the trade in Tirupur.
Processes involved in the Industry
Hand processing: yarn formation
Machine Processing: yarn formation
Cotton Gin Picking Carding Combining the Slivers Spinning Plying
Hand Processing- Fabric Formation
o o o o
Knitting Crochet Lace Weaving
Machine processing: fabric formation
o o o
Knitting Lace Weaving
o o o
Dyeing Bleaching Embroidery
Garment production is organized in a number of stages: the major stages are knitting, dyeing and stitching, while the minor stages include calendaring (shrinkage control), printing and curing.
Most of these stages require some amount of fixed capital, making this industry quite different from stitched garment production which relies mainly on variable capital. The direct and indirect exporters will typically own the fixed capital (machinery, etc.) necessary for some stages of production, but not all of them. For the rest of the stages they will employ jobworkers, who are specialized producers owning machinery only for a single stage. Job-work and the use of indirect exporters allows for decentralization in the production process and is one reason why there can be large variations in the capital intensity of production (measured by the ratio of the amount of capital that the company owns to its production) in the population of direct exporters. However, such decentralization has costs of its own. Quality appears to suffer and delays in shipments, particularly during the peak production season, are more frequent. From our conversations with bankers in Tirupur and officers in the Export Credit. The industry produces knitted garments and is largely focused toward exporting. Most firms produce t-shirts, targeted at low-end retail outlets in Europe and the U.S. There are essentially three types of firms in the industry: direct exporters, indirect exporters, and job-workers. Direct exporters are the ones who receive orders from abroad. Once they have an order they often pass on a fraction of the order to one or more indirect exporters. Indirect exporters are independent garment producers who are entirely responsible for their share of the order, delivering the finished product to the direct exporter prior to shipment. Guarantee Corporation (ECGC), a government agency that insures exporters, it appears that such delays often result in orders being rejected by foreign buyers. This is why more capital intensive firms, i.e. firms that do not rely heavily on job-workers and indirect exporters, are considered to have an advantage Tirupur’s success as an industrial cluster nevertheless owes a lot to the presence of these indirect exporters and job-workers: one reason the Outsiders come to Tirupur is because they have access to the indirect exporters and job-workers, and therefore can go into business without investing in a fully vertically integrated plant. The fact that Tirupur acts as a market and provides a way in which buyers can find exporters is also presumably important, at least for firms that are starting out.
Impact on Economy
The Indian Textile Industry is growing at 20% and accounts for 4% of India’s GDP. It contributes 14% to the Industrial Production and employs about 35 million people. It accounts for 21% of India Gross Export Earning. Foreign Direct Investments inflows worth €681.59 million have been received by the industry between Aug 91 and May 06, accounting for 1.29% of total FDI inflows in the country.
1.9.1. Position of the Indian Textile Industry in the World Textile Economy
India contributes 20% to world spindleage capacity, the second highest spindleage in the world after China. It contributes 6% to the world rotorage and 62% to the world loomage. However in High-tech Shuttless Looms this industry’s contribution is only 4.1% to the world Shuttless loomage. 12% to the world production of textile fibres and yarns is from India and is the largest producer of Jute, second largest producer of silk and cellulose fibre / yarn, third largest producer of cotton and fifth largest producer of synthetic fibres / yarns.
India’s key assets include a large and low-cost labour force, sizable supply of fabric, sufficiency in raw material and spinning capacities. On the basis of these strengths, India will become a major outsourcing hub for foreign manufacturers and retailers, with composite mills and large integrated firms being their preferred partners. It will thus be essential for SMEs to align with these firms that can ensure a market for their products and new orders.
Indian Textile exports consist of • Cotton yarn and fabrics, • Man-made yarn and fabrics, • Wool and silk fabrics, • Made-ups and a variety of garments, knitwear • Woven and silk besides handmade
1.9.2. Indian Exports
Major export destinations for India’s textile and apparel products are the US and EU, which together account for over 75% of demand. Exports to the US have further increased since 2005, post the termination of the MFA (Multi Fibre Agreement). Analysis of trade figures by the US Census Bureau shows that post-MFA, imports from India into the US have been nearly 27% higher than in the corresponding period in 2004-05.
Benetton, the world's leading apparel manufacturer and marketer, makes 130 million garments annually with a turnover of €1.42 billion.
Exports from the country will touch €8.75 billion in 2007-08, up from €15 billion expected in the fiscal just ended (2006-07).
The current turnover of the cluster is about €1.3 billion (the output mix include about €959. 3 million of direct exports, €174.4 million of indirect exports and domestic market sale of about €174.4 million).
1.10. History & Background
Tirupur has carved its name in the Indian history even before her independence. Tiruppur Kumaran, one of the freedom fighters was killed during lathi charge when he was on a patriotic march in Kumaran road without letting down Indian national flag. It still remains as a great inspiration to its people. Tirupur's main road is named after its main hero, Kumaran. Another incident is that C. N. Annadurai, former chief minister of Tamilnadu met Periyar E. V. Ramasamy for the first time in Tirupur during Periyar's campaign which is considered to be a great turnover in the Indian political history. Tiruppur, situated near Coimbatore which is "The Manchester of South India", is known by various names such as "Dollar City", "Knit City", "Cotton City" and mainly "History Centre". Tirupur in Tamil Nadu is one of the most successful and vibrant garment clusters in India. It is popularly known as “Banian City” of the South India is located 60 kms away from Coimbatore city. It has come a long way from a small cotton-marketing centre with a few ginning factories to become a prominent cluster of small and medium manufacturing enterprises gainfully engaged in the production and export of a range of knitted apparels. This township started with the production of low valued cotton hosiery items, mainly the under garments during the 1930’s. Knitting to this city was brought by Mr. Gulam Kadar in 1937.
He established “Baby Knitting Industries” in Kaderpet area of Tirupur. It was followed by the establishment of second knitting unit by a woman, Mrs Chellammal, in the name of Chellemmal Knitting. The first export of knitted garments was made to US and Ghana by Mohan Knits through a Bombay Merchant Exporter in 1972. However, it could not be sustained. In the later years, the entrepreneurial spirit and heavy competition for the domestic market forced the manufacturers to look beyond national boundaries. Thus, in 1980s a few units made sustained efforts to exports and succeeded. In 1987 the exports revenue of Tirupur was Rs.75 crores. Since then, it has not looked back and the exports during the year 2004 touched a figure of more than Rs. 5000 crores contributing almost 80 percent of country’s exports in this sector.
Tirupur was the second town in India to start a hosiery unit next to Calcutta. Even though the knitting came to Tirupur during 1920s, progress worth mentioning took place only after 1935, when the first hand operated hosiery was set up. Till 1960, the cluster produced grey and bleached fabrics for inner wear for the domestic market. In 1974, the first export
consignment was made with the support from National Small Industries Corporation (NSIC). During 1980, some entrepreneurs started producing T- shirts for exports. Some of the Mumbai and Delhi based exporters opened their offices at Tirupur to source their knitwear requirements at Tirupur. From Rs.10 Crore export during the year 1984, the export touched Rs.290 Crore during the year 1990. The momentum for export started during early 1990 after the formation of Tirupur Exporters Association (TEA) to address the problems faced by the exporters. The growth of knitting industry in Tirupur can also be attributed to the failure of agriculture crops over a period of time and the availability of yarn, the basic raw-material for knitting from the nearby mills in Coimbatore. A few people also suggest that the dry climatic conditions in the area also helped the growth of this industry. Before knitting the agricultural labourers were already exposed to the handwoven textiles because of khadi movement started by Mahatma Gandhi. That also helped them to get into to the knitting process of textiles. Started in 1930s as undergarment suppliers to domestic market, the number of knitting units reached around 450 in 1960.
Coordinates: 11°11′N 77°15′E11.18, 77.25
Area • Elevation
• 301.14 m (988 ft)
Codes • Pincode • Telephone • UN/LOCODE • Vehicle
• 641 6xx • +91 421 • INMAA • TN-39 and TN42
As of 2001 India census, Tirupur had a population of 346,551. Males constitute 52% of the population and females 48%. Tirupur has an average literacy rate of 76%, higher than the national average of 59.5%: male literacy is 82%, and female literacy is 69%. In Tiruppur, 10% of the population is under 6 years of age.
Tiruppur assembly constituency is part of Coimbatore (Lok Sabha constituency). Now Tirupur had been split in to Tirupur North & Tirupur south constituency. An MP constituency also had been created in the name of Tirupur containing parts of Coimbatore, Gobi, Palani Mp constituency. As Tirupur is an export hub, naturally communists both CPI & CPI(M) are strong in urban areas ADMK and DMK area also have significant presence. BJP & Hindu munnani had good base here.
Tirupur is the "Knitwear capital" of India. Tirupur contributes to a huge amount of foreign exchange in India. It has spurred up the textile industry in India for the past three decades. Its economic boom boosts the morale of Indian industrialists. Great thing about Tirupur economy is that it is ever growing. It was estimated that the export worth of Rs.1, 12,000 Crores achieved by Tirupur in the year ending 2007. And the production from Tirupur for domestic needs stood at Rs.14000 Crores.
The landmark of Tirupur is the Noyyal river which divides the city into two halves, the north and the south, The railway bridge over railway station, Tirupur Kumaran memorial statue near railway station, Town hall, Corporation memorial pillar (with Globe on its top). The school jevabay higher.sec.school has the India's second largest number of students studying. It is remarkable that it is a school for girls.
The nearest international airport is the Coimbatore Airport. Kumaran road is the busiest road in city while Avinashi road, Palladam road, Kangeyam road, Dharapuram road, Mangalam road, PN Road, Uthukuli road, College road are the arterial roads of the city. The business district is located near the old bus terminal area, but it is slowly expanding to the north. Tirupur also has a railway station and two bus terminals. Tirupur is well connected by trains to Coimbatore, Bangalore, Chennai, New Delhi, Mumbai, Calcutta, Kochi, Mangalore, Nagercoil, Kumbakonam, Madurai, Vellore and Trivandrum. Most of the tourists spots in Kerala And Tamil Nadu are just two to three hours drive from Tirupur viz. Kodaikanal, Ooty, Coonoor, Pollachi Topslip, Neliyampathy, Valparai, Kothagiri and Palani. Tirupur is well connected by moffusil bus services to Coimbatore, Erode, Mettupalayam, Pollachi, Udumalpet, Bangalore, Mysore, Kollegal, Ooty, Coonoor, Kothagiri, Gudalore, Sathiamangalam, Gobichettipalayam, Chennai, Trichy, Devakkottai, Ariyalur, Tanjore, Nagercoil, Kumbakonam, Madurai, Tirunelveli, Rajapalayam, Virudhunagar, Theni, Cumbum, Rameswaram, Tiruchendur, Chidambaram, Tiruvannamalai, Hosur, Salem, Dharmapuri, Krishnagiri, Palani, Dharapuram, Karur, Tiruvarur, Kodaikanal, Valparai, Podi, Tirupathy, Vellore, Palghat, Tiruchur, Guruvayur and Ernakulam.
Media and Communication
Leading Tamil, English and other regional languages newspapers are available in Tirupur. English dailies such as, The Hindu, The New Indian Express, Deccan Chronicle and Deccan Herald are available in Tirupur. Tamil dailies such as Thinaththanthi, Dinamalar, Dinakaran, Dinamani and Maalaimalar are also available in Tirupur. Tirupur falls under Tamilnadu Telecom circle. The city has several Local TV Channels.
2. OBJECTIVE OF THE STUDY
Our objective is to study the financial, marketing and operational details of the companies in the cluster so as to understand the effects of various recessions such as recent power failure, Dollar price fluctuations and employee union issues on the various types of industries in the cluster viz, small, medium and large scale industries.
3. METHODOLOGY 3.1. Research Purpose
Traditional Economic Development Programmes had failed. Key goals missing – The competitiveness of business Solution for individual enterprises rather than all No strategy involved Limited outreach No organic relation among programme activities Mostly programmes are supply driven No accountability of fund spent
There is a global search in process for the solution to cluster development While much has been learned, the lessons often are misapplied Starting with a clear understanding of clusters and the purposes of cluster policy are necessary in order to create the right policies and programs While there is no single “magic bullet,” there are guidelines that can be used that can help foster business clusters Care must be taken to tailor specific programs and policies to the local context
3.1.2. Problems Faced in the Cluster:
Tirupur traditionally suffers from the poor availability of a range of infrastructure services. While the industry associations representing the clusters have made significant efforts to improve infrastructure, these efforts were not materializing in improved infrastructure stock at the pace at which export opportunities were materializing. As a result of the infrastructure constraints the Tirupur cluster was unable to move up the value added chain and was unable to expand in terms of its scale of operations
The action plan to improve the ICT intervention at the Tirupur cluster follows a three pronged strategy, Improvement in managerial understanding & skills towards ICT understanding Improvement in the availability/ quality of ISVs, and Promotion & participation of SMEs in business networks & e-marketplaces.
A system to coordinate the proliferating merchandisers with the suppliers is required in order to minimize their cost of traveling and thus reduce the production cycle. ICT can also facilitate the managers & entrepreneurs in the cluster to establish networking with the various international design institutes & designers, to help them create new designs.
IL&FS undertook the detailed development of the project and recommended an implementation structure based on a Public -Private- Partnership (PPP) basis. In essence, a Special Purpose Vehicle (SPV) under the Indian Companies Act was incorporated in the name an style of New Tirupur Area Development Company Limited (NTADCL). As a Public Limited Company the initial share holders of NTADCL were the Tirupur Exporters Association (TEA), Government of Tamil Nadu (GoTN) and IL&FS. This company had a duly constituted Board of Directors with representation from all stake holder groups. In addition, professional management was inducted in NTADCL to develop and implement each aspect of the project.
3.3.1. Implementation method
• Understand the value chain with respect to market-diagnosis • Focus the markets (potential) • Install a trained Cluster Development Agent • Build TRUST with cluster actors and among them • Help develop a common Vision & draw an action plan • Develop local private capacities to execute (associations+BDS) • Network SMEs, BDS providers & support institutions • Draw an Exit Strategy and withdraw
3.3.2. Tools Used
• Selection of cluster • Mapping • Diagnostic Study • Action Plan • Vision for the cluster • Value Chain Analysis- Identification of pressure points and intervention • BDS- i.e. Business Development Services • Bench marking of Best Practices • Cluster to Cluster learning • An external catalyst ---CDA (Cluster Development Agent) • Monitoring mechanism
4. TEA (Tirupur Exporters Association)
Tirupur Exporters Association (TEA) is a dynamic association, formed in the year 1990 with 500 direct members. TEA offers lot of value added 20services to its member like technical skill upgradation through NIFT-TEA, arranging contact with buyers through IUF, disseminate market information government policy changes through their bulletin and Email.
Tea offers information about firms involved in manufacture of machinery accessories yarn and threads compacting dyeing, tie and dye, bleaching and garment washing knitting printing, offset, fusing embroidery fabric manufacturers and exporters testing, certifying and scientific agencies computer software and peripherals service providers packing materials dyes and chemicals spinning mills fairs and exhibition promoters fire and safety equipments buying agents pre press printing
The achievements of TEA includes establishing a inland container depot India Knit Fair Complex for conducting trade fairs, Tea public school for fashion institute by signing a MoU with NIFT. Some of the special assignments taken up by them are: Apparel park of 65 units in a 175 acre land Promotion of a common brand to gain differentiation advantage
Strengthening and widening the road commonly NH-47 & NH-67 for carry transportation and movement of goods.
Cluster Development Methodology
TEA is the catalyst All projects are conceived by the ‘think tank’ in TEA based on the needs of industry and demands of members
The privilege of participating in any project is first given to members of TEA and only when opportunities are available, the privilege is extended to others subject to the condition that they should become a member of TEA
For every project a separate Special Purpose Vehicle (SPV) is formed In the beginning, the President of TEA will be the head of the new SPV. Depending upon the size of management team required for every project, other office-bearers and members who have specialized management experience are inducted into the management team.
Central and State Government nominees are co-opted to the management team wherever they are partners in the project.
Secretarial services are rendered by TEA Secretariat. Initial spadework, preparation of detailed project report, fund raising, financial tie up etc., are carried out in the platform of TEA.
Simultaneously, a separate Secretariat with professionals and required communication facilities is set up and the secretarial functions are transferred to the new secretariat when actual work on the project is commenced.
TEA collects a service charge for services rendered. On completion of the project, the participants in the project are free to select their own team for operation and maintenance of the facility.
Cluster focused Approach by TEA
TEA was formed in 1990 with 20 exporters now 479 Life Members and 156 Associate Members. Mr. Sakthivel, Founder, President’s approach from the beginning the was development oriented
The leadership had a vision to achieve billion dollar exports in 10 years The focus was on enhancing physical infrastructure Strong desire to demonstrate the power of collective action.
Proactive Role of TEA in Cluster Development
Physical infrastructure-water supply for industrial use, sewerage system with SITP for Tirupur
Town and road development Inland Container Depot Industrial Complex and Apparel Park Trade Fair Centre Institute for Supervisory, Managerial and Creative manpower development School Education Quality management systems Skill upgradation in designing
In the initial stages of growth, the inherent strengths was social capital, easy availability of raw material and flexible specialization helped the industry move up on growth curve. The fast growth became the breeding ground for a number of problems and exposed the glaring short comings in many areas of industrial growth, notably deficiencies in infrastructure, pollution control, manpower availability and so on. TEA assumed a proactive role and executed a number of projects independently and under Public -Private-Partnership (PPP) concept to address a wide range of issues inhibiting growth and development.
TEA Public School-1995 o In a lush green area of 25 acres o Most modern teaching facilities and aids o Each class has 20 students only o Initial investment US$ 500,000 NIFT-TEA Knitwear Fashion Institute 1997 & 2008
o Having latest machinery, testing equipments, CAD and computer training facilities o Highly qualified faculties o Conducting technical training programmes for management executives o Access for industry to make use of the facilities o ISO 9001 certified o Total project cost US4$ 600,000 Domestic and Industrial water supply o By a SPV-NTADCL o 100 MLD water for domestic use o UG sewerage system for Tirupur town o Project cost us$ 250 million India Centre-1997 o To conduct trade fairs of international standards o In a plot of 7 acres-two floors, 50,000 sft. fully air-conditioned built space for Knit Fair Centre built-in display stalls o Two knitwear fairs every year for Summer and winter garments o Two fairs for accessories and machinery o Investment US$ 1 MILLION Apparel Park-2005 o 60 uints,15.00 lakhs sft.built‐in space of international standards for manufacture of knitwear o Fully self contained infrastructure facilities in 165 acres o Investment in land, building and infrastructure‐Rs.77 crores o Investment in machinery Rs.200 crores E‐readiness centre o To disseminate latest ICT knowledge to cluster actors o 4000 sq feet well furnished modern IT training centre with video E conferencing facilities o Place for ISV to meet local companies for ICT needs o Management of Tirupur portal o Investment US$ 250000
Dependence on Government for Infrastructure Improvements
Despite the concerted efforts of the Tirupur Exporters Association to improve the infrastructure in the cluster, budgetary constraints did not result in any major investments. Furthermore, the implementation capacity of para statal agencies were inadequate to implement the kind of large scale infrastructure transmissions at the cluster level. As a result, infrastructure services were below desired levels in terms of quality and reliability.
5. ROLE OF GOVERNMENT IN THE CLUSTER
Investments in the textiles sector can be assessed on the basis of three factors: • Plan schemes such as the Technology Upgradation Funds Scheme (TUFS) Under the TUFS scheme, a total of €15.9 billion has been disbursed for technology upgradation. There are around 26 Apparel Parks in eight states in India, with a total estimated investment of €2.3 billion • Technology Mission on Cotton • Apparel Parks etc.
Specialized textile parks, apparel parks, EOUs and EPZs have been set up with improved infrastructure. The apparel parks operate as Special Purpose Vehicle and are run independently by entrepreneurs. A competitive industry, Apparel has the potential of achieving export earnings of €25.46 billion by 2010. Government support has ensured that key policy changes in the fiscal regime have been made in the past two years, which would ensure rapid increase of clothing consumption as well as the fibre consumption. A single rate will now be prevalent throughout the country. The Tirupur Area Development Program (TADP): The TADP comprises of a wide range of infrastructure projects which collectively would significantly increase the competitiveness and export potential of the Tirupur cluster. These proje cts include roads, telecom, power, effluent treatment, water supply, women’s working hostels, R&D centers, logistic management systems etc. Based on a detailed study the key lacunae that was required to be overcome was the availability of good quality and consistent water. Accordingly, Phase I of the TADP comprised of the implementation of water supply, effluent treatment, sanitation
and sewerage system and low cost sanitation. The other components of TADP were to be implemented as part of Phase II.
Cluster Initiatives for Infrastructure Transformation
Recognising the foregoing the Tirupur Exporters Association (TEA) along with the Tamil Nadu Area Development Corporation (TACID) a wholly owned Company of the Government of Tamil Nadu, appr oached IL&FS to develop the Tirupur Area Development Program (TADP). The TADP comprised of a range of infrastructure services to enhance and support the competitiveness of the Tirupur cluster and sustain its export drive. Industrial units in the Tirupur cluster agreed to undertake this exercise on a commercial format wherein recovery of all investments would be effected through the levy of user charges. The Government of Tamil Nadu and the Tirupur Municipality also indicated their willingness to support such an initiative.
Infrastructure Leasing & Financial Services Limited (IL&FS)
IL&FS is an investment banking Institution established by Government of India agencies in 1987 to develop and implement infrastructure projects on a commercial basis and provide a wide array of value added financial services. As the first Institution focused on the infrastructure sector, IL&FS pioneered the concept of commercialization using PublicPrivate-Partnership frameworks and a project development approach.
Leveraging Of Funds
Central and State Govt, ILFS, ADB, IDBI, LIC, SIDBI, Banks, are shareholders in NTADCL
Ministry of Industry, ICICI contributed for NIFT‐TEA Institute. Ministry of Industry, GoI has sanctioned Rs.50.00 crores under IIUS. Ministry of Textiles contributed for the Trade Fair Centre.
NIFT-TEA Knitwear Fashion Institute Premier Institute of Apparel Management (PIAM) SIHMA Institute of Fashion Technology
Apparel Training and Design Institute (ATDC) The Textiles Committee Apparel Export Promotion Council (AEPC) Indian Statistical Institute (ISI) South India Textile Research Institute (SITRA) Sardar Vallabbhai Patel Institute of Textile Management Tirupur Exporters’ Association (TEA) South India Hosiery Manufacturer’s Association (SIHMA) Tirupur Dyers’ Association (TDA) KNITMA
ICT linkages among various cluster actors are relatively not very strong. Only TEA uses ICT to communicate with the members. TEA, NIFT-TEA Knitwear Fashion Institute, ISI and the Textiles Committee have their own websites. Organizations which have a national presence like Indian Statistical Institute (ISI), the Textiles Committee use their websites for dissemination of a large portion of information about the organizations and their activities. Website of TEA is linked with the websites of its other members.
Benefits of Cluster Development Programme
Reduced Transaction Cost Comparative Advantage Improved Access to Information More Innovations High Rate of Enterprise Development Institutionalization of Success Potential Opportunities for Technology Upgradation Co-opetition Efficiency
6. ANALYSIS AND INTERPRETATION
We have analyzed the basic details of a group of 50 companies in the cluster. We have got the details on the business ownership of the various firms so as to locate the nature of cluster companies. We have identified the firms’ year of establishment so as to calculate the average age of the cluster companies. We have identified the firms’ dependency on the other cluster companies so as to skeleton the network structure of the cluster. We have analyzed the personal details of the person-in-charge in a firm for a group of 50 companies in the cluster. We have classified them all into 4 age groups so as to study the average age group of the managers of the cluster. We have classified them all into 3 groups on the basis of educational background so as to study the managerial capability of the managers of the cluster with respect to education. We have identified their nature of their family so as to analyze the family structure of the managers. Is there any influence of the family on the firms’ operation? The information regarding the nature of living, cost of living in the cluster, the progress and the operating environment of the cluster companies are collected. The above information helps us to analyze in detail the perception and personality traits of the person-in-charge in a firm for a group of 50 companies in the cluster. Moreover, we have collected the following financial information from the cluster companies. Initial investment Current worth of the firm Sales Volume Firms’ Turnover for the past five years
The above information helps us to classify the cluster companies into three major groups based on its operations.
Large Scale Medium Scale Small Scale
The information on the firms’ Turnover for the past four years makes us identify the operating efficiency of the cluster companies. Year 2004-05 2005-06 2006-07 2007-08 Small scale (in lakhs) 34 43.5 55 36 Medium scale (in lakhs) 39 40 43.7 48 Large scale (in crores) 6.1 11 19 23.5
Decline in Garment exports by 10%
During the Financial Year 2007-08, the exports from Tirupur has declined by 10% and clocked Rs. 9,950 crores as against Rs. 11,000/- crores registered in 2006-07.
Tirupur was usually experiencing 15% growth after abolition of quota and if the decline of 10% in 2007-08 is included, then the total export loss from Tirupur is 25%.
Central Government has also been requested for removal of Fringe Benefit Tax, payment of all Service Taxes, reduction of interest rates and refund of state levies and taxes.
Turnover of Small scale industries
Turnover (in lakhs)
40 30 20 10 0 2004-05 2005-06 2006-07 2007-08 Year Small scale (in lakhs)
Turnover of Medium scale industries
Turnover (in lakhs)
40 30 20 10 0 2004-05 2005-06 2006-07 2007-08 Year Medium scale (in lakhs)
The 10% decline in Tirupur Export has happened first time in the history of Tirupur exports since 1985. Due to this, there will not be any off take in the TUF Scheme for modernization / expansion of the garment units.
Turnover of Large scale industries
Turnover (in crores)
15 10 5 0 2004-05 2005-06 2006-07 Year 2007-08
Large scale (in crores)
The information on the other investment helps us in making decision about the self-sustaining nature and financial dependency of the cluster companies. The difference between the initial investment and the current worth of the firm in relevance to the operations of the firm gives us the growth of the individual cluster companies. The ratio between the sales volume and the turnover gives us the operating price and thus gives us the information on the nature of customers of the cluster companies. We have analyzed the decision making capability and leader perception of the person-incharge in a firm for a group of 50 companies in the cluster.
Number of labourers
24 63 Small scale Medium scale Large scale 250
Higher exports Low export orders Stagnant No effect
Small scale (in %) 9.09 54.55 13.64 22.72
Medium scale (in %) 30 40 10 20
Large scale (in %) 44.44 33.33 16.67 5.56
Number of industries (in %)
60.00 50.00 40.00 30.00 20.00 10.00 0.00 Small scale (in %)
Number of industries (in %)
40 35 30 25 20 15 10 5 0 Higher exports Low export orders Stagnant No effect
Number of industries (in %)
50 40 30 20 10 0 Higher exports Low export orders Stagnant No effect
7. FINDINGS & CONCLUSION
The overall assessment of Tirupur and its textile industry can be brought through the following SWOT analysis which helps in identifying the issues that are to be addressed in the future.
Issues to be addressed based on SWOT
Access to market information and emerging market trends Product innovations and diversification Level of design capability Level of skills and knowledge related to quality, productivity, financial, marketing, etc.
Operational costs by way of process improvement/productivity improvement and optimal use of out puts.
Awareness about emerging technology, management and market environment. Organized/institutionalized mechanism/systems for sourcing of raw materials, marketing.
Access to avail of institutional credit for technology upgradation and expansion of the units.
Information about various Government EXIM policy schemes/non-Governmental financial support schemes.
Proactive initiation on environmental related issues Exposure to better work practices and technology in the area of knitting/processing. Capacity building for Direct Exports.. Creation of critical infrastructure such as effluent treatment, uninterrupted power supply, road development and provision for single stop international class manufacturing centre
Networking among Firms in Cluster
Networking is an important element in all SSI clusters. All small units of clusters are equally responsible to create the whole web of cluster. Firms have connected through each other by vertical and horizontal integration. It has been reported that – Tirupur Cluster is still lacking of vertical integration although, process of modernization is bringing the chances for more vertical integration among firms. The qualitative finding has been that Tirupur has started with a very small level of units but later it developed its networking. Also, networking helps the clusters to move in specific fields. The entrepreneurs here reply that there are a large no. of firms concentrated in only one industry i.e. knitwear garments industry. A successful joint venture of Switcher brand at Tirupur is a good example of nice networking within cluster.Local and other organizations play an important role in development of networking base inside the cluster and bring a boom in regional economies performance. For example, the AEPC sponsors buyer/seller meetings, organizes trade delegations, individual sales tours and conducts market survey. Also, it collects trade data, both locally and internationally.
Human resources (HR)
Human capital is the backbone of this cluster. Cheap source of labor and high potential in workforce brings competitiveness in the cluster. As per findings, at Tirupur cluster, labor availability, performance and quality are major elements that affect the development of the cluster and play a big role in improving regional economy performances. Tirupur has got prime position in using its human resource capacity as the owners and the workers are committed to their work and they always co-operate with each other. Entrepreneurs report that for the past 10 years they have had never faced any severe labor problems or strikes and they have abundant skilled workers and professionals. The composite units/firms are
gradually becoming more organized in executing the works. Also, its control over the industrial unrest is by nature of the social relations.
7.3.1. Skills and training
Proper educational and training institutions help the cluster to use its maximum capacity of human resources. At Tirupur, NIFT - Fashion educational institute run by ‘TEA’ (Tirupur Exporters Associations), SIHMA Fashion Institute run by the South India Hosiery Manufacturers Associations are main source of producing efficient workforce for this cluster.
Community and Local culture of Cluster
Social and communities linkage is also found as important elements behind the development ofcluster. Social and cultural activities and functions always help in developing a bond within this cluster. Involvement of local communities makes the cluster more successful.
Embeddedness with Locality
Embeddedness with a locality is a big factor behind development of any cluster; it creates excellent bonds between actors inside the cluster. Conducive weather, determination and commitment, and easier availability and quality of work force in the firms involved in Tirupur cluster are possible due to value embeddedness with locality. Also, the present status of regional economic factors like tax structure affects the embeddness with locality, as per findings in the Tirupur cluster case. The Indian government support is not up to the mark for the betterment and development of this Industry.
Now-a-days, globalization is highly affecting the elements of development in SSI clusters. To compete in the global market clusters should be competitive with all elements lying inside the cluster. For example, the rise in Tirupur cluster is mainly due to the performance of the firms & availability and quality of labor. The discouraging policy of Indian government towards SSI clusters reduces its competitiveness in global market if we compare it to other countries like China, Malaysia, Singapore and others. The cost of processed knit fabrics is 12 to 18% less in China when compared to India. But when we look into detail, the fabric quality and garment sewing workmanship in India is far better than China.
Environment has been important to any cluster development. Tirupur has progressed rapidly in last decades and now some of firm set up their high quality plants to get better produce of their investment although most of firms using traditional system of production plant that create lot of pollution and waste product. There is any fundamental measures have been taken to control the polluted environment. Where as it seems that entrepreneur not much interested to talk on environment in Tirupur cluster but, there should be independent agency or government agency to look after the clean and green environment at Tirupur.
As mentioned earlier, government policy is highly affecting elements in the trend of cluster development in a regional economy. As mentioned in preceding chapters, government policy is central to the eradication of all problems of clusters whether it is infrastructure issues,
financial problem or sickness in an SSI cluster. At Tirupur, local entrepreneur does not assume that government policy has ever been in their favor. They mentioned that central government of India not taking much attention on them even this cluster has biggest contributor in export of India then early ages. It has been reported that, government officer behave unresponsively with small entrepreneur that shows that lacking of appropriate policy. Here, it should be single window policy implemented to make things fast at business environment, we will see more on it in next chapter.
8. CURRENT ISSUES OF CONCERN 'Restoration of duty drawback rates on knitted garments'
The Department of Revenue, Ministry of Finance while announcing the Duty Drawback Rate for 2008-09, has reduced the said rate for cotton knitted garments from 11% to 8.8% and the value cap has also been reduced for knitted garments to the dismay of Tirupur Exporters Association.
Currently, the garment exporting units are undergoing severe strain in price front, due to increase in input costs like, yarn cost, power cost, processing charges, transaction cost and are struggling to survive in the competitive global market. The cost of escalation has happened mainly due to increase in petroleum products, only thing that helps is the spiraling oil prices in the global market. The exporters have always looked up to the government whenever any factors affected business performance and the government has always been kind enough to give sops / solutions to bail out the exporters from the crisis after studying the concerned factors.
Owing to this, the exporters are literally not in a position to enjoy the benefit out of it. Moreover, in recent period, the currency fluctuations are quite abnormal and also unpredictable.
Added to this, Tirupur exporters have alone lost more than Rs. 100 crores in derivatives deals since the exporters had resorted for derivative deals mainly to offset the losses that may be incurred due to continuous falling of rupee against dollar.
‘Rupee Export Credit Interest Rates’
Reserve Bank of India has issued a Circular on August 01, informing the closure of the Interest Rate subvention of 4% given on Export Credit with effect from September 30, 2008 and this effect has come at a time when the banks are revising their Prime Lending Rate (PLR) upwards. The interest rates should be at par with competitive countries to be equally competitive in the price front, not to mention product quality.
As per the earlier circular, the interest subvention was given upto March 31st 2009 and based on this circular only; the exporters had worked out and given their costing to buyers. At this point of time, the sudden removal of Interest subvention at 4% given on Packing Credit Interest Rates would affect the cost of manufacturing.
Considering the increase of diesel prices (which includes duties of Customs and Excise also) which resultant into increase of power cost and transaction cost in addition to hike in yarn costs, increase in processing charges and accessories cost, at least the status quo in the drawback rate at 11% is required for the survival of the knitwear exporting units.
The Tirupur Exporter's Association has requested the Finance Minister to kindly take into account the various adverse factors gripping on knitwear garment exporting units and restore the duty drawback rate for cotton garments to 11% against 8.8%.
Uncontrollable hike in prices of power and yarn, in the recent months have compelled knitwear exporters in Tirupur to decide on a 15 percent hike in the prices of the exportable goods. With regard to this the Tirupur Exporters Association (TEA) has asked its member units to hold talks with overseas clients in order to reach to a conclusive decision on prices.
The cost of power, yarn has gone up. The inflation is continuing to go up. Hence they have asked their member units to ask for a price increase to the tune of 15 percent. Exporters will
be further relieved even if the revision was around 10 percent because rupee had depreciated recently making the situation a little bearable.
It had been reported that Tirupur exporters lost around Rs14 billion worth of export orders last year due to rupee appreciation. With the increase in cost of operation, export units had to go easy with their expansion plans.
They are also optimistic that, total exports from Tirupur, may reach around Rs115 billion in the current year, up from Rs100 billion of last year.
‘Power supply: Textile manufacturers over TNEB adjudication’
Textile manufacturers here by and large are expressing relief over the adjudication of TamilNadu Electricity Regulatory Commission in the matter of restriction and control of power supply to High Tension (HT) and Low Tension (LT) consumers and surcharge imposed by Tamil Nadu Electricity Board (TNEB) recently.
Official sources told The Hindu that the Commission in a sitting on October 24 had pronounced an order nullifying TNEB’s directive to disconnect the service connection of a consumer for violation of the restriction of consumption during peak hours in the evening imposed as part of load shedding.
The regulatory body observed that the direction was a violation of Section 56 of the Electricity Act 2003 (Central Act 36 of 2003), which authorizes the Board to disconnect power supply only in the event of default in payment of electricity charges.
Sources said that the Commission also clarified that the fiat on levy of 50 per cent additional charges on LT industrial and commercial consumers, who had exceeded the ceiling of 80 per cent of their average bi-monthly consumption during the previous year subjected to a maximum ceiling of 2,000 units, should be implemented only after obtaining public views.
Tirupur Exporters Association president A. Sakthivel termed the Regulatory Commission’s instructions as a “welcome move”. “Removal of ceiling on energy consumption for LT
consumers is imperative for the growth of small and medium scale units functioning in the Tirupur knitwear cluster considering the fiscal and monetary turmoil experienced by the industry in the last few months following the sub-prime crisis in the United States,” Mr. Sakthivel said.
Knit Cloth Manufacturers Association president Ahill Rathinasamy said: “It is indeed an injustice to levy additional charge from the textile units which were promptly paying the dues at a time when the TNEB has been giving power either free or at concessional rates to some sections of society and multinational companies.”
‘Extensive use of firewood’
Extensive use of firewood in the garment cluster of Tirupur without any planned afforestation programmes in place has been causing concern to environmentalists.
A pilot study on consumption of firewood in the garment cluster of Tirupur recently carried out by Prakurthi, a Bangalore-based non-governmental organisation, stressed the need for finding ways to ensure that available supplies of firewood were used to maximum efficiency in the textile manufacturing chain. This would avoid environmental and social problems arising out of uncontrolled deforestation. The study revealed that the textile industry had been consuming an average of 5,250 tonnes of firewood every day. “The firewood is primarily used for steaming, washing, compacting and printing processes in the sector,” P. Parthiban, programme director (Tirupur region), Prakurthi, told The Hindu. Of the 1,100 boilers in Tirupur cluster including the standbys, 95 per cent use firewood as fuel to generate steam.
‘US recession hits apparel industry in Tamil Nadu’
Coimbatore's apparel industry is severely hit due to the ongoing recession in US economy and is now receiving only few export orders.
Tirupur is a major source of foreign exchange earnings for the country because of its exports. 56 per cent of India's total knitwear exports comes from Tirupur.
"Tirupur exports apparels worth 14,000 crores. Total knitwear export is 16,500 crores. But this year, we expect about five per cent minus growth rate because of the recession in United States so we may do 10,500 crores, about five per cent less," said Sakthivel, president, Tirupur Exporters Association.
Tirupur is famous for the export of all knitted garment wears such as t-shirts, polo - shirts, sweat shirts, banyans, pajamas and night dresses on various fabrics like single jersey, interlock, fleece, polar fleece, pique jersey, pointelle jersey, rib, pointelle rib and drop needle. The textile and clothing sector is the largest employer after agriculture and accounts for nearly four per cent of India's gross domestic product.
The present economic crisis in the United States has affected the apparel industry with the apparel exports going down by 15 per cent in Tirupur. In knitwear exports, Tirupur has registered a fall of five per cent.
The Apparel Exports Promotion Council is taking various steps to meet the present crisis.
"Well this crisis in US is affecting us a lot. We are definitely expecting a drop of 10-15 per cent in the immediate future. Stores are coming in. I have the reports. The buyers who are coming in are not buying in as large quantities as they were buying earlier. The orders are already down by 20-25 per cent in terms of quantity," said Rakesh Vaid, Charirman, and Apparel Exports Promotion Council.
If Bangalore can be India's Silicon Valley, Tirupur can be our Textile Valley," points out K Palaniraman, a garment manufacturer in India's textiles hot-spot in Tamil Nadu. Facts on Tirupur's garment industry:
Tirupur is one of the largest foreign exchange earning towns in India. Last year, the export turnover from the town was more than Rs 5,000 crore (Rs 50 billion). There are some 7,000 garment units in the town that provides employment opportunity to close to one million people.
The first spot of any international buyer for Indian garments is Tirupur. Buyers from 35 countries frequently visit Tirupur. Tirupur can deliver customised samples in less than 12 hours; half a million pieces in a matter of days.
Fifty-six per cent of India's total knitwear exports come from Tirupur. The Export Import Policy of 2002-2007 makes laudable tribute to Tirupur for its contribution to the export efforts and calls it a 'Town of Export Excellence.'
According to, A Sakthivel, President, Tirupur Exporters Association, the first hosiery factory with hand-operated machines was set up in Tirupur in 1935. "For more than 30 years, garment manufacturers in the town were producing mainly grey and bleached banians (vests)," he says. It was in the late 1960s that the industry slowly diversified into manufacturing other inner garments, including banians and underwears, consumed largely by the domestic market. "But Tirupur's fortunes took a dramatic turn in the late 1970s when we began exporting our items," says Sakthivel. He recalls it all began when some exporters in Mumbai introduced an Italian, Antony Verona, to Tirupur. "Verona began importing woven garments from Tirupur and he introduced more Italian businessmen into trade with Tirupur," he says. Sakthivel says these days there is no competitor to Tirupur in the garments industry in India.
But there is a darker side to Tirupur. Amidst the prosperity that has befallen this textile town, many ills afflict it. These include potholed roads, acute shortage of water, environmental pollution and virtually non-existent sewage systems. The discharge of salts in effluent from the dyeing factories in Tirupur has led to large-scale environmental degradation. Environmentalist P K Sundaran says the huge textiles manufacturing is concentrated in a small geographical area in Tirupur that it has exerted extreme pressure on natural resources. "The groundwater and soil fertility levels in Tirupur are very low. The textiles industry has progressed here at the cost of the environment," Sundaran points out. The Save Water Forum Sundaram heads has conducted a study that says the level of Total Dissolved Solids in the groundwater has gone up to 5,000 to 6,000 milligrams per liters. The water scarcity is so acute in the town that water for dyeing units is fetched in tankers from as far as 20 kilometres by the garment units. But Sakthivel says the water problem is one serious issue that the industry needs to get solved quickly. A water supply project to make good quality water available for wet processing has already has taken shape in public-private partnership. The New Tirupur Area Development Corporation Ltd is implementing this project. Some of them say although quota restrictions have been dismantled, domestic textile players continue to be caught in archaic Indian government regulations. Consider this: Under the 'Handloom Reservation Order,' that the government has issued, production of 11 items including non-terry towels and varieties of bed sheets has been reserved exclusively for the handloom sector. A regular garment maker cannot produce and sell these items, which they say has huge export potential. There is also the 'Hank Yarn Obligation Order' from the government which stipulates that 40 per cent of the cotton yarn produced by every garment unit in the country has to be in hank form for use by the handloom sector.
"But the real problem that the government does not understand is that there is no market for the hank yarn," says an exporter. According to textile industry estimates, the unsold hank yarn stock currently stands at about 18 million kg. Although Tirupur is a small city compared to Coimbatore, it is the centre of Tamil Nadu's cotton knitwear industry and successfully markets its products in India and overseas. It is one of the most fastest growing city in India in terms of Industry. It is called the Knits Capital of India as it caters to famous brands and retailers from all over the world. Nearly every international knitwear brand in the world has a strong production share from Tirupur. It has a wide range of factories which export all types of Knits fabrics and supply garments for Kids, Ladies, Men's garments - both underwear and tops. The city is known for its hosiery exports and provides employment for about 300,000 people. Some of the world's largest retailers including C&A, Walmart, Switcher, Diesel, ARMY, Tommy Hilfiger, M&S, FILA, H&M, HTHP, Whale, Reebok, VALUE, PitStop, 100% import many textiles items and clothing from Tirupur. There are many export Houses in Tirupur successful and fast growing like Eastman Exports , PGC Industries-Prem Durai Exports (Prem Groups), Stallion Garments, Statesman Fashion, Regency Garments, RBR , SCM , SP , Poppys, RF Garments ( Rite Fit garments),UNITED APPARREL. A large market for export reject pieces also exists centered in the khaderpet locality close to the railway station. Project Vikas, an initiative by Microsoft and National Manufacturing Competitiveness Council (NMCC) in partnership with the Tirupur Exporter’s Association (TEA), was rolled out recently. The initiative, which has been ongoing for 18 months, aims to enable the units in the cluster enhance their manufacturing competitiveness in the domestic and global market by creating opportunities in market access, establishing knowledge networks and enabling supply chain linkage in the cluster ecosystem.
This discussion is broadly based on qualitative findings of elements of regional economies, based on interview questions. Here, we will consider on some points which have been presented in research findings
The process of liberalization started by the Congress government in the year 1991 has created wide opportunities for the development of small-scale industries. The small enterprise has emerged as a focus area for forging and promoting trade. These economic reform programs fostered the emergence of Indian industry as a global competitor with increase in exports. To improve the competitive strength of the small scale industries clusters will need to be implementing suitable policy measures as a most important element of its development. The following policy measures can be discussed in this regard.
Reverse effect of Globalization
Tirupur has been facing a acute problem in global market, its products are not very competitive in compare to products from China either in terms of price or quality. A number of small industries affected or closed or are facing closure because of the inflow of cheap and tax free items from China via Nepal. So, there should be an appropriate bilateral agreement with Nepal to check it. The finished goods should have higher import duties rather than the raw material. Also, international market is packaged with big competitors. Globalization of the economy left much impact on India in this cluster. Now-a-days majority of the units are multiplying their production capacity and operation costs are mounting significantly to compete in market. So, globalization is affecting negatively for this cluster.
Sales tax and Excise duty is an important factor for SSIs because large no. of SSIs clusters are involved in production of finished products and its marketing. Exemption from excise duty and sales tax makes SSI products more competitive in domestic market as well in global market. It has been seen that in respect of certain products, the duties of excise and other tax on intermediate goods are higher than on the finished goods. The structure can be improved to enhance the tax relevance.
Tirupur textile cluster become larger than before in last few decades and its covered areas are still not well satisfactory in aspect of marinating clean and green environment. The entire cluster use a lot of chemicals processes to finish its final products. Use of chemicals in factory process also produce it’s waste products that’s not well arranged to disposed off and it’s affecting the local quality of water. Government should draw attention to act on this as it’s already suggested by environment research centers of India and abroad.
The age of globalization and booming information technology has made all industries highly competitive. The technological change in the Tirupur cluster has been quite slow. There are uncountable reasons responsible for this. The entrepreneurs have not made any efforts for modernization because of their domestic type of setup and selling. Also, there is a lack of availability of appropriate information that induces latest technologies. One of the biggest factors responsible for slow technology enhancement is inadequate flow of credit for investment in technological development. Testing facilities are also not easily available.
Technology Bureau for International Industrial Partnerships and Technology Bureau for Small Enterprises, Delhi, has been providing useful services to the small scale units from many clusters. But, the rate of progress in their performance has not been very impressive. They need sufficient backup, especially in promotion of their activities. In addition to change in their organizational systems, there should be a focus on quality standard certification e.g. 1SO 9000, ISO 9001 and ISO 9002. Certification should be made compulsory to introduce quality-consciousness among entrepreneurs.
As found in Tirupur cluster, lot of units are still going through phase of modernization although, employment law for employment is not for favorable to them. It’s quite old and need to revise, it has been found that the existing social security measures such as Employees' Provident Fund, Insurance Act, Maternity Benefits Act and Compensation Act are not easy for entrepreneurs of small scale units to adopt and implement. This affects the SSI units’ average competitiveness.
Also, employees can go in for strike or challenge for judicial process where dates of hearing are fixed months after filing the application due to slow judicial process in India.
Co-ordination among various Government Agencies
It has been reported in many papers and noticed at small clusters and also in eminent cluster like Tirupur textile cluster about complexity about function of Government agencies, that deal with small scale industries in India, for example, Ministry of SSI, SSIs’ Development Commissioner office, Small Industries Development Organization, Small Industries Service Institutes, National Small Industries Corporation, Small Industries development Bank of India, Regional Testing Centers, District Industries Centers, State Financial Corporations, State Industrial Development Corporations, State Small Industries Development Corporations etc. But, in all of them there a lot of cases are due to lack of clearance by them as many units do not fulfill their criteria.
Pending Payment Issues
Pending or dues payment by large companies negatively affects the SSIs unit in cluster. It continues to be a major problem for the Tirupur cluster. To check it, there could be adequate safeguards in the tax realization pattern by marinating credit and transactions transparency and by maintaining their records. For example, whenever a creditor company goes to file its tax returns, the recoverable amount should be charged from them and paid to the concerned SSI.
Tirupur’s entrepreneur reports that India’s central government policy does not seem to be very protective towards them except of EXIM policy. In USA, there are special laws for the small scale sector23. But in India, there is not any proper program for small scale clusters. Moreover, 50 items have been de-reserved which were exclusively reserved for the small scale sector. In order to protect small scale sector from multinational companies a certain percents of items should be purchased by Central and State Government agencies especially when the items are reserved for the SSI sector. The USA Government policy for protection to indigenous industries can be replicated for Indian SSIs.
Single window policy
Due to not being up dated of certain policy and traditional system of working make slow the all business environment of nearby. Tirupur and other similar clusters now become an eminent cluster and exporting products contributor and source of foreign currency earner. But, in Tirupur there isn’t any single window policy24 implemented yet as well as it seen in EPZ (now named as SEZ) in Indian region. There are complex business legal processes that make slow business activity in this area and distract the foreign investor as well. As for example: inappropriate partnership act; in which there are four ways to set up a company in India: Partnership, Proprietorship, Limited Company and Private Limited Company. Here, it is seen that the partnership issues are most problematic. So, it can be suggested to there should be options of Limited Partnership as it has in United Kingdom.
Overall, the survey concluded huge gaps in the deployment of Information & Communication Technology (ICT) in the areas of supply chain management, designing, merchandising and customer relations. The cluster appeared more conscious of spending on ICT in monitoring the quality standards, as the exporters’ source supplies from multi-level production centers & varied production sources, which requires quality synchronization for standardized exports. Study found limited ICT "vision" for an integrated business and there was limited knowledge on latest technologies such as data warehousing, e-commerce etc. While large firms in the cluster are inline with the leading international manufacturing sectors in ICT usage, most of MSMEs requires strong support. The most common handicap mentioned in ICT implementation was delay in installing the systems due to limited availability of the local software vendors which are mostly based at Coimbatore, Chennai or Bangalore. It appears that there are huge gaps in the deployment of ICT technology in the areas of supply chain management, designing, merchandising and customer relations. Huge amount of money is being spent only for monitoring the quality standards. Since most of the exporters have multilevel production centers and varied production sources, such quality monitoring and control can only be expected. In a nutshell Tirupur exporters do not require be educated about the benefits of ICT. They are trying addressing the issues internally with available sources with them and the small service providers. So far no concrete platform to address the issues relating to the industry and are affordable to the SMEs, have not been developed. Demonstration of the system, which is affordable and applicable, has to be made. Human resources in the industry are to be trained. Application and its benefits are to be demonstrated through model units and by extending handholding during the initial period of demonstration and application.
Age o o o o 21 – 30 31 – 40 41 – 50 51 and above
Company Established Year Educational Qualification of Person-in-charge : :
What do feel about the standard and cost of living in the cluster?
What are the modes of communication used with the customers? o o o Websites / e-mail Telephone Only through Buying Offices
How do you identify and reach the target market? o o o o Through buying office Direct contact with clients/customers As an allied work Others (Please specify) _________________
Where did you get the Supply of raw materials? o o o Only from Tamil Nadu From other states Imported from foreign countries
How do you perceive the other companies in the cluster as? o Competitive 56
o o o
Supportive Dependant (Income Sources) Others (Please specify) _________________
Mode of transport that you use for o o Local Supply Export : _________________ : _________________
Your Initial Investment Current Worth of your firm Your Sales Volume (No. of pieces/kgs) in Can you give us the turnover for the past 5 years? : : : :
Is there a dependency on other cluster (Tirupur) companies? o o For Core Operation For Allied Operation
What do you feel about the progress of your company? o o o o Booming Steady growth Declining Stagnant
Total number of employees in your company - Initially Currently : :
No. of employee levels (Hierarchy/Different posts) in company :
What type of people you recruit (Recruitment preference)? o o o o Skilled Labor Young /Unskilled Labor Contract Labor Graduates 57
How will you decide on the salary structure in your company? o o o o Skill Experience Work/Output Others (Please specify) _________________
What are the measures that you undertake for Employee benefits and care? o o o o ESI/PF Mediclaim/Insurance Food/Accommodation Others (Please specify) _________________
What are the opportunities for Employee Growth (Individual Development)? o o o o Promotions Internal Training Social Awareness/Development Programs Others (Please specify) _________________
What effects do you have with increase in $ price (From $38 to $48)? o o o o Higher profits Lower Export orders Stagnant Goods Other Effects
What are the effects of the current financial recession? o o o o Profit (Please specify on scale of 1-5) Loss (Please specify on scale of 1-5) Break-Even Other effects (Please Specify) : _________________
What are the effects of the recent power failures?
Counter Measures that you applied against during recession period? o o o o Layoff Downsizing Salary reduction Other measures 58
Are there any pollution caused to the environment by your company? o If Yes (Please Specify the countermeasures applied) i. _________________ ii. _________________
What are the aids that you get from the Govt? o o o Aids being received so far Aids expected during recession Aids provided during recession : : :
What are the actions that you have taken for the betterment of society (CSR)?
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http://www.tea-india.org/ http://www.tirupur.com/ http://www.tirupur.mobi/ http://www.tirupurchamber.com/ http://www.theknitwear.com/ http://www.apparelworld.org/ http://www.tirupurjobs.net/ http://www.teonline.com/ www.thehindubusinessline.com/bline/2005/01/11/stories/2005011101711700.htm http://www.tn.gov.in/spc/annualplan/ http://www.eda.gov/Research/ClusterBased.xml http://www.isc.hbs.edu/econ-clusters.htm http://www.worldbank.org/urban/led/cluster2.html http://europa.eu.int/comm/enterprise/entrepreneurship/support_measures/cluster/ http://www.hindu.com/2008/10/06/stories/2008100654990600.htm http://www.fibre2fashion.com/news/apparel-news/newsdetails.aspx?news_id=64437 http://www.hindu.com/2008/10/16/stories/2008101652830500.htm http://economictimes.indiatimes.com/News/News_By_Industry/Cons_Products/US_recessi on_hits_apparel_industry_in_Tamil_Nadu/articleshow/3611536.cms http://news.chennaionline.com/newsitem.aspx?NEWSID=d0268539-fb04-4778-aec1549f78569056&CATEGORYNAME=CHN http://www.hindu.com/2008/10/26/stories/2008102659600700.htm http://www.hindu.com/2008/11/04/stories/2008110452870100.htm http://www.thehindubusinessline.com/2008/11/05/stories/2008110550842100.htm http://www.hindu.com/2008/11/06/stories/2008110658740500.htm http://www.hindu.com/2008/11/14/stories/2008111460780300.htm http://www.hindu.com/2008/11/15/stories/2008111556281500.htm http://www.hindu.com/2008/11/17/stories/2008111757200300.htm http://ssi.nic.in/ssischeme.htm
Abrasion Resistance - The degree by which a fabric is able to withstand loss of appearance through surface wear, rubbing, chafing, and other frictional actions. Absorbency - The ability of a fabric to take in moisture. Absorbency is a very important property, which affects many other characteristics such as skin comfort, static build-up, shrinkage, stain removal, water repellency, and wrinkle recovery. Air Permeability - The porosity of a fabric as estimated by the ease with which air passes through it. Air permeability measures the warmth of blankets, the air resistance of parachute cloth, the wind resistance of sailcloth, etc. as measured on standard testing equipment. Anti-Bacterial (Anti-Microbial) - A fabric that has been chemically treated or a fiber that is created by incorporating the anti-bacterial chemical agent into the fiber formula, making the finished fiber or fabric resistant to, or inhibiting the growth of micro-organisms. Bleaching - A process of whitening fibers, yarns, or fabrics by removing the natural and artificial impurities to obtain clear whites for finished fabric, or in preparation for dyeing and finishing. The materials may be treated with chemicals or exposed to sun, air, and moisture. Blend - A term applied to a yarn or a fabric that is made up of more than one fiber. In blended yarns, two or more different types of staple fibers are twisted or spun together to form the yarn. An example of a typical blended yarn or fabric is polyester/cotton. Bonding - The technique of permanently joining together two fabrics or layers of fabrics together by a bonding agent into one package. The bonding of fibers in a single layer of material is called a web. Special adhesives, binders, or thin slices of foam may be used as the marrying agent. Buttons - Specified by design, size, color, and type---such as brass, melamine, or pearl, buttons are either shanked (attached by passing threads through the shank's eye) or holed (attached by passing threads through the button's holes). Calendering - A process for finishing fabrics in which such special effects as high luster, glazing, embossing, and moiré are produced.
Cleaning - Hand operation in which the basting threads are removed from the garment; usually done prior to the final pressing. Collar - Two or more thicknesses of fabric attached to the neckhole opening to provide a firm and neat-appearing finish. Comfort Stretch - The term given to the freedom of movement experienced in the wearing of a garment that contains spandex, or has stretch engineered into a yarn through mechanical stretch construction. Cotton - A unicellular, natural fiber that grows in the seed pod of the cotton plant. Fibers are typically 1/2 inch to 2 inches long. The longest staple fibers, longer than 1 1/2 inch, including the Pima and Egyptian varieties, produce the highest quality cotton fabrics. Crease Resistant Finish - Also referred to as CRF. Finishes used on fabrics that make them resistant to wrinkling and creasing, such as synthetic resin type finishes like durable press. Today some fabrics are made highly resistant to wrinkling through fiber blending and construction. Crease Retention - The ability of a cloth to hold or pleat or a crease, which has been intentionally created, through the use of a heat treatment. Heat setting of thermoplastic fibers causes creases to be permanently set. Curing - A baking process with the use of resin finishes, applying heat under carefully controlled conditions to a fabric or the garment, which cause a reaction in the finishing agents and make them work. Crease-retention, water repellency, wrinkle resistance, and durable press are examples of finishes that are cured. Denim - True denim is twill weave cotton-like fabric made with different colored yarns in the warp and the weft. Due to the twill construction, one color predominates on the fabric surface. Double Knit - A fabric knitted on a circular knitting machine using interlocking loops and a double stitch on a double needle frame to form a fabric with double thickness. It is the same on both sides.
Double Weave - A woven fabric construction made by interlacing two or more sets of warp yarns with two or more sets of filling yarns. The most common double weave fabrics are made using a total of either four or five sets of yarns. Durability - The ability of a fabric to resist wear through continual use. Dye (Piece) - Dyeing of the fabric into solid colors after weaving or knitting. Elasticity - The ability of a fiber or fabric to return to its original length, shape, or size immediately after the removal of stress. Embroidery - An embellishment of a fabric or garment in which colored threads are sewn on to the fabric to create a design. Embroidery may be done either by hand or machine. Encapsulation - A process in which the fibers of a fabric are coated with a filmy substance to create certain high performance qualities, such as breathability. Ergonomics - The study of improving a garment design by enhancing the wearers' comfort, performance, or health. Finished Fabric - A fabric that has gone through all the necessary finishing processes, and is ready to be used in the manufacturing of garments. These processes include bleaching, dyeing, printing, heat setting, etc. Interlining - An insulation, padding, or stiffening fabric, either sewn to the wrong side of the lining or the inner side of the outer shell fabric. The interlining is used primarily to provide warmth in coats, jackets, and outerwear. Knit Fabric - Fabrics made from only one set of yarns, all running in the same direction. Some knits have their yarns running along the length of the fabric, while others have their yarns running across the width of the fabric. Knit fabrics are held together by looping the yarns around each other. Knitting creates ridges in the resulting fabric. Wales are the ridges that run lengthwise in the fabric; courses run crosswise. Lining - A fabric that is used to cover the inside of a garment to provide a finished look. Generally, the lining is made of a smooth lustrous fabric.
Micro-encapsulation - A method of enclosing polymer additive materials in microscopic capsules, which can then be released under certain conditions to enhance performance properties. Pill - A tangled ball of fibers that appears on the surface of a fabric, as a result of wear or continued friction or rubbing on the surface of the fabric. Sizing - The application of a size mixture to warp yarn. The purpose of this is to make the yarn smoother and stronger to withstand the strain of weaving, to provide an acceptable hand in the woven gray goods, and to increase fabric weight. Spinning - This final operation in the production of natural yarn consists of the drawing, twisting, and the winding of the newly spun yarn onto a device such as a bobbin, spindle, cop, tube, cheese, etc. Texturizing - A process performed on specialized machinery which create bulk, stretch to the yarn, and therefore creates new aesthetics to the finished fabric. Wash-and-Wear - Ability of a garment to be washed by hand or in a washing machine and require little or no ironing. Also referred to as "Easy Care." Weaving - The process of forming a fabric on a loom by interlacing the warp (lengthwise yarns) and the filling (crosswise yarns) perpendicular to each other. Yarn - A continuous strand of textile fibers created when a cluster of individual fibers are twisted together. These long yarns are used to create fabrics, either by knitting or weaving. Zipper - The physical parts of the zipper are: scoop teeth, chain, lock, pull tape, and slider. Zippers used in industrial clothing are metal or brass. Plastic zippers are used typical apparel garments. Zippers are used as a closure in pants, skirts, and dresses.
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