Monday 12 August 2013

Tough measures to cure garment sector’s Re woes


Mumbai: These days, it is easy to get an appointment with chief executives of garment manufacturing firms. They want to talk at length of their woes, mainly due to the declining dollar and even large firms have been forced to send home workers. Two large Mumbai firms, which have been in the business for over two decades, claim they have sent home 600 workers. Coming in the back of a year when the garment industry received record orders from foreign buyers, the reversal seems to suggest that something is seriously amiss. Says Vijay Agarwal, chairman, Apparel Export Promotion Council, and owner of Mumbaibased Creative Garment: ‘‘The sudden depreciation of the rupee hit the industry like a tsunami. A short term relief is much in need to stem the closure of units.’’ apparel manufacturer Agarwal paints a grim picture. He shows statistics that the export has actually declined in the first few months this year. Though he is unwilling to talk about his company, as the chief of the industry association, he laments that many firms across the country have shut shop. In fact, firms in Tirupur have given their employees extended holidays in the festive season as Indian orders have been diverted to Bangladesh and China, where the local currencies have not appreciated like in India. The change in the attitude of garment manufacturers is quite dramatic. As early as 2004, they wouldn’t want to talk about their business. wholesale apparel manufacturers Mostly family-owned, garment manufacturers were then making money hand over fist, thanks to firms quotas they held to export to developed countries like the US, Europe and Japan. Larger firms broke down their business into smaller ones and ran them under different names to benefit from government regulations. A large manufacturer in Tirupur, who spoke at length at his current problems, had then said: ‘‘We have nothing to say to the media.’’ apparel manufacturers india What changed? The WTO abolished quota in 2005, making it a free-for-all. Existing players had a head start, but months into the free market the cracks began to show. Bought up in a tame environment, Indian companies were highly inefficient in managing capital and manufacturing productivity. An Indian worker made 40% fewer shirts than their Chinese and Thai counterparts. Says a Delhi-based consultant: ‘‘Margins in the quota era was 30% plus, there was no incentive to be efficient.’’ Again as an export industry, the industry was pampered by the government with further tax and credit concessions. Even today, textile and garment firms wanting to expand their business can get a 5% special discount on the interest rates available to other industries.

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