Wednesday, February 02, 2011

Indian struggle

High cotton prices, rupee appreciation and increasing global competition have hit India’s knitting industry hard this year. But can faster turnaround times, increasing synthetic fibre use and installation of more modern technology help drag it out of the doldrums? Paul Cochrane reports from India for Knitting International

Knitwear manufacturers in Tirupur, the southern Tamil Nadu state city that accounts for 60% of India’s knitwear exports, have struggled to retain sales due to high cotton prices, forcing manufacturers to look to synthetics as an alternative.

In 2009, the city’s total exports of garments and knitwear rose to $2.55bn, after dipping 10% in 2007-2008, but the rise in cotton prices has led to a 15-20% drop in production and job losses of 25,000.

As a result, the target set by the Tirupur Exporters’ Association (TEA) to double annual exports from the city’s industry by 2012 to $5.5bn will not be met, Padma Shri A Sakthivel, TEA president and chairman of local company Poppys Knitwear Ltd told Knitting International.

“We set the target for 2012 after achieving Indian rupees 11,000 crores ($2.42bn) in 2006-07, but we have been facing various issues, one by one, like appreciation of the rupee against the US dollar, the global recession and price increases for petrochemical products and other input costs, mainly cotton yarn. We will not reach the target we set.”

In mid-November, Tirupur manufacturers took part in a nationwide strike to petition the Indian government to come to their aid and ban cotton exports because of spiraling cotton prices.

“We have been requesting the government to take measures to get cotton yarn available at the right price for knitwear exporters, a pre- shipment packing credit rate at 7%, an increase in duty drawback rate and a continuance of 2% interest subvention. All this would help to respond to competition from countries like China and Bangladesh,” said Mr Sakthivel. “We have also asked the government to address infrastructure issues and for bank interest rates to be reduced to be on par with competing countries.”

Exporting units

Tirupur has 800 knitwear exporting units, but is dominated by 20 major players, for instance Deecee Export and the Natural Clothing Company, with exports exceeding $22m in each case, catering for, among others, major brands such as Ralph Lauren, Hanes, Wal-Mart, C&A, Reebok and Disney.

About 30% of exports are bound for the US and 60%, the European Union, according to TEA. Many companies are medium-sized: 500 companies have exports of less than $2m a year each.

“No company is free from problems after the increase in cotton prices, but the most affected group are the smaller exporters,” said Mr Sakthivel.

Indeed, several factories contacted by Knitting International said they had ceased operations until cotton prices fell while other companies had seen a major contraction. “We received many inquiries for 2010 compared to last year, but we were unable to book new orders because of the high yarn price,” said G Balaji, manager of Gokul Inc.

Meanwhile, at the Mani and Mani Fabs factory, sales had dropped 15% in 2010, even compared with recessionary 2009, said managing director N Manicka Vasakam.

To tackle the slowdown, TEA has launched the Knitwear Technology Mission (KTM) to help exporters produce synthetic based garments, particularly sportswear and swimwear, instead of cotton.

“Synthetic garments have a global market round the year whereas currently, out of cotton garment exports, we are able to supply only one fourth of the year,” said Mr Sakthivel.

“The KTM will play a major role in introducing the latest technology, such as seamless knitting machinery, as well as design consultancy. We hope that after two years the share of synthetic garment exports from Tirupur will be comparatively higher,” he added. Meanwhile, the TEA has also launched a Knitwear Fashion Institute.

Tirupur exporters have also adopted fast fashion, able to turn around an order within an average of 60 days and no more than 75 days, but a figure still far behind the likes of Turkey as regards the European market. Until the shift to synthetic fibres takes place and with cotton prices high, the immediate outlook for Tirupur’s knitwear exporters is downbeat.

“In the year 2010-11, our exports will come down due to increases in yarn prices. Once the situation improves, we will certainly increase our exports,” said Mr Sakthivel.

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