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India : Government policy should support the synthetic textiles segment, opines Indo Rama''s Lohia |
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2004-8-18
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China and India are set to encash on the opportunities, which will be unleashed from January 1, 2005 when the multi-fibre agreement (MFA) comes to an end. Bangladesh, Sri Lanka and the Asean countries (except for Vietnam) would face difficulties as the quota shield is removed, offering China and India unhindered access to USA and EU markets.
Opining about the downsizing of the textiles exports targets for the year 2010 to US $40 billion from $50 billion, O P Lohia, Managing Director, Indo Rama and Textile Committee Chairman, Federation of Indian Chambers of Commerce & Industry (Ficci) stated in an interview that the study released by the finance minister may have revised the target in the light of discriminatory fiscal policy between natural and manmade fibres.
He said that the target could be missed unless the government changes what a segment of the textile industry calls its ‘bias against manmade textiles’ despite the latter’s 19 per cent growth, compared to 5 per cent growth in cotton textiles.
In Budget 2004-05, the government reduced the excise duty on cotton from 8 percent to 4 percent giving relief to the cotton textile segment, while tax on synthetic fibre was raised from 12 per cent to 16 per cent. Retaining 24 per cent duty on filament yarn dealt another blow to the synthetic textile industry, which constitutes about 55-60 per cent of India’s total textile production.
Lohia further added that the tilt towards natural fibres would not help attract the requisite Rs 140,000 crore investment in the textile sector of the country.
Meanwhile, India aspires to achieve $40 billion exports by 2010, quite a jump from $14 billion this year.
He said that the government policy is a major obstruction for the growth of the synthetic textile segment, which was the fastest growing segment, constituting about 60 per cent of total textile production.
When asked about the the growth of the synthetic fibres segment, Lohia said, ”Manmade fibre constitutes 60 per cent of China’s total textile exports, in Indonesia’s case it is 65 per cent. But in India, its share is limited to a mere 15 per cent of total textile exports. Globally, there is a demand for synthetic and blended textile products, but India is encouraging natural fibre at the expense of manmade fibre. If this trend (fiscal policy) continues at a time when opportunity is knocking at our door, Indian exporters will miss the bus.”
“As far as growth potential of the synthetic segment is concerned, in the domestic market there is a shift from cotton to polyester. Polyester fabric is increasingly used in apparel due to its bright colour and low maintenance,” he added.
He was confident of the manmade segment as Indian Oil Corporation (IOC) and Reliance Industries, both Indian conglomerates were making huge investments in their PTA (raw material for making polyester fibre) plants.
This clearly was indicative of the sectorial growth potential, according to him.
Secondly, he said, “Land required for cotton production is limited, and production depends on rainfall etc. Availability of cotton is uncertain. Hence, a textile company with huge production units would not rely on cotton only. It would have a mixed production unit where it could shift its production line to synthetic in case of unavailability of cotton. Besides, synthetic cloth is used by the poor who are the largest consumer. Hence manmade fibre has a good future, that is why we are doubling our production capacity with an investment of over Rs 900 crore.”
Speaking about China’s predominant position post quotas, he said that even though the country would hold edge over others, major global companies would not source 100 per cent of their requirements from China, as they could not depend on a single source.
India, he said would be the second best choice due to access to raw material, manufacturing infrastructure and cheap labour. Countries like Bangladesh and Sri Lanka did not have an integrated manufacturing system, as a result they would not gain in the long run. |
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