EDITORIAL ARTICLE

Selection of machinery combination for spinning mills

by
Dr. H.R. Sheikh
Professor, Textile Institute of Pakistan
A great deal of thought and careful consideration is devoted by the entrepreneurs
intending to set up spinning mills in order to decide the size of the units and the
machinery combinations. Selection of state-of-the-art machines for all sections of
the spinning unit would obviously be an ideal solution! However, it is not
practically possible for the majority of the entrepreneurs to opt for an ideal
machinery combination and unit size. Some of the main factors which must be
optimised to finalise the size of the unit and brands of machines to be included in
the combination are discussed in the following paragraphs.
1. Size of spinning units
The spinning unit should be of an economic size. The annual output of the unit
should be sufficient to make the operations feasible. During the eighties a spinning
mill with an installed capacity of 13000/14000 spindles was considered to be an
economic unit. From mid-eighties till early nineties the textile industry of Pakistan
passed through a period of boom in the international market. However, as the
boom petered out the economic size of the spinning unit also increased to an
installed capacity of 17000/18000 spindles. Due to escalation in the prices of
almost all inputs, the size of an economic unit is currently estimated at about
20,160 spindles. With 100% capacity utilisation, average count of 21's, the daily
output of the unit would be approximately 38,220 LBS or 13.76 million LBS (360
working days) annually sufficient to make the unit feasible. Installation of an
economic size unit is an essential pre-requisite for a spinning mill to be viable.
2. Predominant machinery combinations
Whereas the size of a spinning unit determines its output rate count-wise, the type
of machine combination effects both the output and the product quality. Sponsors
are required to negotiate and finalise a financial plan, based on the total project
cost, which is divided into debt and equity components. The debt component
includes amount of foreign exchange required for the import of machinery usually
under suppliers credit. As the spinning units earned fabulous profits in the eighties,
large numbers of entrepreneurs were attracted towards investments in the spinning
sector.
During early ninetees commercial banks and DFIs evolved approved machinery
combinations and fixed ceilings of loans amount for each combination. Although
these combinations were based on a blend of conventional and modern machines
yet the proportion of conventional low speed machines was on the higher side to
limit the loan amount ceilings and thus cater for as large a number of entrepreneurs
as possible. Some of these combinations which included LUWA air conditioning
system, quality control and auxiliary equipment, accessories etc. with
corresponding loan amounts are briefly reported for a spinning mill comprising of
17,280 spindles as under:

Machinery Combination Loan Ceiling in foreign
currency C & F KHI
Loan Amount (PAK Rs.)

Early ninetees September, 2003
1 All Japanese plant Y1226,800,000 Rs. 183,526,826 Rs. 608,983,520
2 All Japanese plant except Y917,352,000 Rs. 137,234,024 Rs. 455,373,533

Blow room (Trutzschler) and cards
(Crosrol MK4)
DM 1,200.000
648,000
Rs. 17,015,400
Rs. 27,246,910
Rs. 38,520,000
Rs. 59,222,664

Total Rs. 181,496,334 Rs. 553,116,197
3 All Chinese Plant US$ 3,329,000 Rs. 72,940,720 Rs. 192,306,010

Except drawing frame (Toyoda) and
Auto-coner (Murata)
Y 399,600,000 Rs. 59,779,361 Rs. 198,361,440

Total Rs. 132,720,081 Rs. 390,667,450

Exchange rates:


US$ Rs. 21.9107 Rs. 57.7669

Sterling Rs. 42.0477 Rs. 91.3930

Japanese Yen Rs. 0.149598 Rs. 0.4964

D.M. Rs. 14.1795 Rs. 32.10
It would be noted from the above estimates that the current C & F Karachi prices of a spinning unit (17280 spindles) have escalated by about 300% as
compared to prices prevailing in 1990 mainly due to depreciation of Pak rupee.
As already pointed out fabulous profits earned by the spinning mills in the eighties
attracted large number of entrepreneurs to the spinning sector. All of them wanted
to set up a spinning mill as soon as possible, earn huge profits and thus join the
ranks of billionaires. Most of these entrepreneurs were new to the spinning sector.
Machinery combination selected by most of them is listed at No. 3 above. The
main justification to opt for this combination was that it was cheaper as compared
to the other combinations.
In some cases Crosrol MK4 or MK 4.5 cards were included in this combination in
place of Chinese cards. Even with this modification the technological level of the
units as a whole remained low due to low speed roving frames and ring spinning
frames. Approximate number of such units, which came on stream between
1990/91 and 1995/96 was 226 with an installed capacity of 3.149 million spindles.
Another serious draw back of these units was the inflated project cost, at which
these were set up by inclusion of kick backs. No wonder that 63 of these units were
closed by 1996-97, i.e. within a few years of the start of production!
3. Product cost versus sale price
A crisis developed in the textile industry in the mid-nineties. Due to slump and
recession in the international market, high interest rates, escalation in cotton prices,
high cost of eletric power, stores and spares and multiplicity of taxes, the
operations of the units with low speed conventional machinery combinations were
no longer viable. The cost of products manufactured by these units exceeded the
corresponding sale prices prevailing in the market. Consequently, these units
incurred heavy financial losses, were unable to service the loans, became defaulters
and ultimately closed down! By the end of 1998 APTMA reported closure of 91
out of a total of 440 spinning mills, i.,e. out of the total installed capacity of 8.7
million spindles about 2.0 million spindles were out of production! The
predicament of the closed units highlights the necessity of selecting a machinery
combination which facilitates the manufacture of yarn of the required quality at
competitive price. Moreover, the anticipated product cost should be based on
realistic considerations with adequate safety margin to absorb unforseen expenses
such as rise in wages, escalation in the price of other inputs etc.
Like the product cost, the sale price should also be anticipated on realistic
consideration, preferably on the basis of market profiles of developed countries
such as U.S.A., E.U., Japan etc. which import textile products from developing
countries such as Pakistan.
4. Open-end rotor spinning sector
The open-end rotor spinning sector of the textile industry of Pakistan is also a
classic case which proves that spinning mills based on old, second hand machinery
combinations cannot survive. Most of the installed capacity of rotors was built up
by the import of second hand machines discarded by the European and American
mills. The rotor spinning sector was, therefore, incompetitive from the start. The
working capacity of open-end rotors has been declining steadily. Currently, out of
an installed capacity of 146,000 rotors, almost 80,000 rotors are out of production.
Thus, the working capacity is only about 45.21%.
In conclusion, it may be stated that both the ring spinning and the open-end rotor
spinning sectors are in urgent need of balancing, modernisation, technological up-
gradation as well as replacement of the old and obsolete machinery combinations
whereever required by the state-of-the-art machines. This is the only way that these
sectors can prepare themselves to face the challenges and exploit the opportunities
of the WTO commencing with effect from 1.1 2005. Large textile groups and
individual companies have started implementing rapid modernisation programmes
in their textile units. TCO reports that an investment of US$ 4.0 billion has been
made in the last four years, However, the condition of the open-end rotor spinning
sector has not changed at all which calls for immediate action by the concerned
public sector agencies as well as owners of the units.
Acknowledgement
Useful technical information received from M/s. Haris Shakeel, Khalil Sajid,
Muhammad Saqib Rahmatwala during the preparation of this paper is gratefully
acknowledged.