Confident of meeting market needs

Interview with A. Sakthivel, president, Tirupur Exporters' Association.

A. Sakthivel, president of the Tirupur Exporters' Association (TEA) is regarded widely as the most influential businessman in Tirupur. He was one of the first producers of knitted garments in Tirupur to see the export potential in the business and has clearly grown in stature as the business has matured over the years. While being the chairman of the Poppys Group, one of the largest units producing knitted garments in the town, he also serves on the boards of several bodies.

He is a director in UCO Bank and in New Tirupur Area Development Corporation Ltd, which has been promoted by the TEA to address major issues such as the availability of water, sewerage, roads and pollution control in Tirupur. He spoke to V. Sridhar about Tirupur's evolution as a global supplier of woven garments, its strengths, its problems and its potential after the multi-fibre agreement (MFA) lapses in December 2004. Excerpts:

Tirupur is now globally recognised as a major source of garments, particularly woven garments. Can you tell us how it all started?

In the mid-1970s , some exporters in Mumbai introduced an Italian, Antony Verona, to Tirupur. He came here looking to buy T-shirts. Verona found that the town had great potential as a supplier of woven garments. That was the beginning of Tirupur as a major source of garment exports. At that time the technology was quite rudimentary; for example, in the sphere of dyeing. Verona brought dyeing masters from Italy. He also taught us the techniques of the trade. At this stage there were no big players.

Were you already in the business during this time?

We were mainly doing business through exporters in Mumbai. We had started the business, mainly catering to the local market, in 1973. We started exporting in 1978-79. By 1981-82 chain stores from Europe started buying from producers here. Slowly the business gathered momentum. In 1985, exports from Tirupur was only worth Rs.15 crores. In the 1980s annual growth rates were very high, in some years clocking 50-60 per cent. Today we are doing more than Rs.5,000 crores of business. In the early stages, exports were mainly to the chain stores in Europe. The main stumbling block to exports to the American market in the period was the quota regime of the MFA. But we managed to overcome these hurdles.

In 1990, the TEA was formed, which gave an impetus to exports. Prior to the formation of the TEA, most of the exports originating in Tirupur were made through exporters based in Mumbai and Delhi. The TEA made it possible for exports to be made directly from Tirupur. This encouraged many entrepreneurs to start businesses here. After its formation, the TEA fixed an export target of Rs.2,000 crores by 1993, and achieved it.

Why were buyers in foreign markets interested in sourcing garments from Tirupur? What was so special about the place?

When the Italians first came, they noticed that the level of entrepreneurial skill and capability was of a high order here. We also had a very good working relationship with the trade unions in Tirupur. That was a very important reason for Tirupur's success. After the formation of the TEA, we entered into a three-year agreement with the workers on wages and other benefits. The work culture in the town was also good. Many good young entrepreneurs have entered the business, bringing a lot of dynamism into the business.

In the early stages, the hosiery industry focussed on Tirupur because it found that the water in Tirupur was good for bleaching. Another reason for the Tirupur phenomenon was that farmers, facing a scarcity of water, were looking for opportunities elsewhere, particularly in business. Many of them entered the hosiery business as small producers. If you had a small room in the town you can set up a unit making 10,000 pieces a day (of hosiery products). Production was fragmented. Knitting was done separately; dyeing was done separately, and so on. Buyers found that Tirupur products were of good quality. We have never ever had a quality or delivery complaint from buyers. These are very important factors in the export business.

Producers here also had the habit of investing their profits in expansion projects. This ensured that they matured as they grew in the business. As a result, the producers here grew along with the buyers. Producers in particular, invested in modern technologies, particularly in machines. They did not take their profits out of their business; money was always put back into the business. Machinery manufacturers from all over the world come here with their products because they know that producers here are receptive to new techniques.

How is Tirupur placed to tackle the situation after the MFA is phased out?

In 1998 itself the TEA realised that the market will change after the MFA is phased out. We have been preparing members to address the global market in the post-MFA situation. We are confident of addressing the needs of the market after the MFA lapses. The producers here are capable of making quick deliveries and adhering to tight delivery schedules. Nowadays, repeat orders sometimes require us to deliver within 8 days; and we have proved time and again that we are capable of meeting these deadlines.

But, over time, competitors have emerged in other places in India, and from across the world.

In India, there is no competitor to Tirupur. Of course, there was Ludhiana. But Ludhiana was doing something different, not what we in Tirupur were focussed on. Producers in Ludhiana were mainly doing knitted garments made of acrylic and wool; slowly producers there are also moving into the market for cotton knitwear. China is a major competitor. A lot of investments have also been made there to improve technical capabilities. The infrastructural facilities are also good there. But entrepreneurial skills are better in India. However, there are also problems here. Infrastructure is a major problem here, particularly the lack of good quality roads to the ports. But the government is now addressing these issues.

You have been in this business for more than 30 years. How has the industry changed during this time?

One does not need to make huge investments to enter this business. In the earlier stages there were many players who did job work for other bigger producers. But yesterday's job worker may be an exporter today. About 60 per cent of the producers are small. But now the situation is changing. Very small producers cannot survive because once quotas governed by the MFA go, buyers will want to place large orders, which will require production facilities to be scaled up. Buyers also want modern factories and compliance with international norms. These require big factories, good amenities and facilities and better pay for workers. In November, the Netaji Apparel Park will become operational. This will improve capabilities here significantly. More than 50 units are going to be located there. The Park will showcase Tirupur as a major supplier of knitwear.