With the expertise built over two decades, Tirupur's knitted garment industry gears up to meet the challenges posed and take advantage of the opportunities offered by the dismantling of the multi-fibre agreement on international textile trade.
in TirupurTHE Manchester of India, Coimbatore, may be on the decline, but just 55 km away, Tirupur, the global supplier of knitted garments, appears ready to take on the world. The town has come a long way in the past two decades. From being a small player in the mid-1980s, Tirupur is now one of the major suppliers of cotton knitted garments to the chain stores in Europe and North America. For a town that exported more than Rs.5,000 crores worth of knitted garments last year, prosperity is not evident. It is a matter of surprise that the dusty town, with its potholed roads, virtually non-existent sewerage, and a huge scarcity of potable water manages to export close to 90 per cent of the garments manufactured there.
In the mid-1970s, foreign buyers of cotton knitwear, in search of low-cost suppliers from round the world, first noticed Tirupur's potential as a reliable supplier. By the mid-1980s, a confluence of fortuitous circumstances enabled Tirupur to grab the opportunity to cater to the needs of the global market. The business was initially conducted by small players who did "job work" for exporters. They basically made the garment that met the specifications of the exporters who were at that time based mostly in Mumbai and Delhi.
This kind of production meant that different aspects of the process of making knitted fabrics were outsourced to different agencies. For instance, some producers, often operating from one-room sheds, did the knitting, while others undertook the job of dyeing the finished fabric. The margins were often low, but the duty drawback kept these at a level that sustained the small units in business.
However, as the very nature of the business has changed over the last few years many smaller players who were drawn to Tirupur by the prospect of making good and fast money, have been forced out of it.
THE industry, on the eve of the dismantling of the multi-fibre agreement (MFA) wears a different look now. The bigger units supply their wares to some of the leading retail chains in the developed world such as Wal Mart, Marks and Spencer, C&A and many others. Many of the products wear labels of some of the top brands.
N. Palaniswamy, chairman and managing director, Eastman Exports, which registered a turnover of Rs.300 crores in 2003-04, said that top-selling brands such as Diesel, Nike, Fila, Jockey and many others are all not only made in Tirupur but also labelled in units there. The finished products are sent in such good condition that they can be unloaded at overseas retail outlets and put on display. Palaniswamy said the company has not only acquired International Organisation for Standardisation (ISO) certification but has also ensured that it is in compliance with the Oeko-Tex Standard, which ensures that products made in its factory conform to ecological standards.
The rapid increase in exports has occurred at the cost of the environment. The large-scale activity has exerted pressure on natural resources concentrated in a small geographic area in and around Tirupur. According to some studies, groundwater and soil fertility levels have been affected adversely in the past two decades. This has been caused mainly by the discharge of salts in effluent from the dyeing factories in Tirupur. Although several small units have established common effluent treatment plants and many of the larger ones have dedicated plants to treat effluent, an industrialist in Tirupur said that it is unlikely that the damage caused can be reversed.
The level of Total Dissolved Solids in the groundwater has gone up to 5000-6000 milligrams per litre. Water for dyeing units is fetched in tankers from as far as 10-15 km. Transportation of water by tanker increases the landed cost of water, road traffic, vehicular pollution and traffic-related accident hazards. In order to mitigate these negative impacts and to make good quality water available for wet processing, a water supply project in public-private partnership mode has taken shape. This project, to be completed soon, is being implemented through a Special Purpose Vehicle company called New Tirupur Area Development Corporation Ltd. (NTADCL). It will supply water to industrial users in Tirupur, apart from the Tirupur municipality. Water drawn from the Cauvery is also to supply water to wayside villages near Tirupur.
A consortium of leading banks has provided debt financing for this project costing about Rs.1,000 crores. The intake well is located at a site near the confluence of the river Bhavani and the Cauvery at Kooduthurai in Bhavani town. Water is to be taken from the intake well to a water treatment plant 1.4 km away. The sewerage comprises a 124-km collection system covering 60 per cent of the wards in Tirupur municipality, including residential connections.
The large export houses in Tirupur are confident that they would be better off after the MFA lapses on January 1, 2005. A. Sakthivel, president of the Tirupur Exporters' Association told Frontline that the end of the quota regime could open up better business opportunities for exporters (see interview). However, he warned that non-tariff barriers under the pretext of quality norms or labour standards could be a stumbling block.
The bigger units in the knitwear industry in Tirupur have gauged the requirements of buyers in the post-quota period and embarked on expansion, modernisation and technological upgradation projects to enhance their productive capacities. Sakthivel pointed that out the "latest processing and production facilities, using state-of-the-art machinery" was an important part of Tirupur's endeavour to sharpen its capability after the end of the MFA.
The Netaji Apparel Park, with facilities to house more than 50 units, is also a part of the effort to enable Tirupur to stay in the race after the end of the MFA. With an investment targeted at around Rs.250 crores, the Park is expected to provide work to about 15,000 persons in the first phase, leading to incremental foreign exchange earnings of Rs.1,500 crores.
IT is natural that exporters are optimistic about what the future holds for them. Between January and August 2004, exports from Tirupur amounted to $723.5 million, compared to $584.3 million during the same period last year. While this may appear to be good going for exporters, it is important to recall that they had been subjected to shocks earlier. For instance, exports from Tirupur fell sharply in the wake of the East Asian financial crisis. Knitwear exports from Tirupur fell nearly 26 per cent in dollar terms in March 1998, compared with March 1997. The sudden and precipitous decline of currencies of the South-East Asian countries made their textiles cheaper compared with those supplied from Tirupur. This experience points to the uncertainties afflicting exports from India and other developing countries.
Quality control has acquired added importance in the post-quota post-MFA trade in textiles. Exporters fear that the quality of the product may be used as an excuse to either beat down prices or to enforce an outright ban on imports from developing countries. Testing services have become crucial in this context. Labtex Testing Services, for instance, offers facilities for exporters to get their products tested before they are delivered. This reduces the risk of shipments being rejected on the grounds of poor quality.
The garment export business has to adhere to stringent delivery schedules. Two privately-run container terminals near Tirupur offer logistics solutions to exporters. Makesh Devarajan, general manager, Tirupur Container Terminal Pvt. Ltd., said the company's terminal at Rakkipalayam near the town is exclusively meant for textile cargoes from Tirupur. This, he explained, ensured that the cargoes of exporters were never delayed or misplaced in transit.
Operations at the container terminal are almost wholly manual. This is because it handles mainly "loose cargoes" which, unlike bulk cargoes, are not easily amenable to mechanised operations. Most of the cargo goes to Tuticorin for shipment to their final export destinations. The private terminal handles about 11,000-12,000 teu (twenty-feet equivalent units) of cargo. Since 2001, another private operator has also made an entry in the container terminal business in Tirupur. Devarajan expects traffic from Tirupur to increase substantially in the days ahead, particularly after the MFA lapses.
At a time when size matters in the business several large companies have established vertically integrated manufacturing facilities. The Royal Classic Group, for instance, which started operations in Tirupur in 1991, has even established contract farms for growing cotton. During the current season it has sourced cotton from contract farms covering 2,000 acres; this is set to increase to 8,000 acres in the following season. The company expects to start commercial production at its new ginning plant by January 2005. It is also establishing a new spinning plant. Most of the machinery for the plants has been imported, as is the case with most units in Tirupur. Although the company is focussed on foreign markets, it is also targeting sales in the domestic market.
One of the consequences of the liberalisation process has been the complete decimation of the Indian textile machinery industry. P. Natarasan, president of the South India Imported Machine Knitters Association, said that manufacturers from Ludhiana used to supply machines in the early stages of Tirupur's rise as a major textile centre. Now, he said, Indian machinery manufacturers "are finished". Machines arrive from across the world - Taiwan, Germany, Japan, Italy, the United Kingdom, United States and so on.
Natarasan estimates that about 250 members of his association have imported close to 10,000 machines from abroad in the past decade. He observes that virtually every exporter would have also imported foreign machines during this period. He explained that the primary task of his association, which consists of members who do "job work" for other exporters, is to get them a good deal from foreign machinery suppliers.
Natarasan points out that though foreign machines cost more, they also work faster and deliver better designs on textiles. A foreign machine, according to him, costs at least Rs.15 lakhs and may even go up to Rs.70 lakhs in some cases, compared with an Indian machine, which costs about Rs.75,000. However, the imported machine offers productivity levels that are six or seven times greater than those of Indian machines. Moreover, better designs are possible, including those involving computerised jacquards. Natarasan said that the bigger exporters in Tirupur were among the first to use the imported machines.
The boom in Tirupur has resulted in prosperity. And it has resulted in things that would have been unthinkable two decades ago. On the outskirts of the dusty town is the Tirupur Golf Club. Promoted by a prominent industrialist, the 18-hole course is spread on 80 acres with fairways that do not cross one another. In an astounding feat in water-starved Tirupur, thanks largely to innovative water harvesting and irrigation techniques, the greens are truly green.
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