Garment exporters moving out of Delhi

APPRECIATING RUPEE TAKES ITS TOLL

Unable to sustain export growth owing to the strengthening rupee, garment and apparel manufacturing companies are leasing their factory space in Delhi to others and re-locating to cheaper locations like Manesar and Faridabad.

Companies have complained that their order book has declined 40 per cent and profitability 10 to 15 per cent as a result of the appreciating rupee, making it increasingly difficult to pay workers.

A Delhi-based exporter requesting anonymity said: "The rents in the National Capital Region are 50 per cent lower than in the capital and it is also easy to establish a unit there, as garment exporting clusters are present in the region. So leasing out the factory space to information technology (IT) companies that are always looking for expansion, is a good proposition."

A Delhi-based exporter has closed one of his three units and relocated to Manesar. If the rupee appreciation continues, the exporter is planning to shift his entire operations to the cheaper rental locations away from Delhi.

Confederation of Indian Textile Industry Secretary General D K Nair said, "There are some companies that are moving out of Gurgaon where the wages have gone up by 40 per cent."

Looking at current trends in the textile sector, Nair said that because of overhead costs, it is not possible for a unit to close.

"In such a situation, if an owner runs the mill, he will have losses every month and if he closes, he will have to bear an even larger loss by way of overheads. It is better to re-locate to cheaper locations and lease the space to other companies," he said.

Significantly, some companies have even started sending fabric to Ahmedabad for dyeing.

Considering the transportation factor, they say it is cheaper to do so there as compared to Delhi and Gurgaon.

Some companies, who have overseas operations have scaled down their production domestically and are relocating to Bangladesh, Indonesia, Vietnam and Pakistan.

"The wages in Indonesia are 30 per cent lower and productivity is higher by 40 per cent, while in Bangladesh wages are 50 per cent lower and productivity is 25 per cent more than India," said a senior executive of one such company.