Rise in input costs forces textile cos cut corners

MH Mills plans to offer VRS to 400 employees.

The rising rupee which has hit exports, and surging fuel costs coupled with soaring cotton prices, have left no other way for textile companies in Gujarat but to follow cost cutting measures. Prominent among these measures is manpower rationalisation to reduce spiralling operating costs.

Ahmedabad-based MH Mills Limited, for instance, is in the process of offering voluntary retirement scheme (VRS) to around 400 of its employees. The company believes it can bring down the workforce from the existing 1,300 workers. Industry sources say more textile companies may follow suit.

"Input costs have risen so high that it has now become a necessity for any textile company to cut down on labour. To optimise our labour force, we are offering VRS to around 400 workers to bring down the number to 900. This apart, cost cutting in terms of power consumption and product mix are also on the cards," said Biren Parikh, managing director of MH Mills. The company will shell out anywhere between Rs 5 crore and Rs 7 crore for VRS and another Rs 2-3 crore for buying cost-effective power equipment.

Besides, M H Mills has taken up the task of creating a young team. "We are trying to bring down the average age of our workforce from 54-55 years to 48 years in the next one year," said Parikh. By buying cost-effective devices, the company looks to save 25 per cent of power costs. The manufacturer of yarn-dyed shirting and bottom weights will soon create a paperless workplace for itself by getting its mill fully computerised.

Even textile majors like Arvind Mills are not to be left behind when it comes to cost-cutting measures. "We are taking certain cost-cutting measures but we won't be able to share more details on this. It is obvious that the rise in input costs has been affecting our profitability," said Jayesh Shah, chief financial officer of Arvind Mills.

Another Ahmedabad-based company, Aarvee Denims and Exports Limited, too is taking cost-cutting measures. The company plans to switch to alternative energy to cut down fuel costs.

A company official said Aarvee has already invested Rs 110 crore to set up a windmill in order to save on fuel. If the Confederation of Indian Textile Industry is to be believed, over 350,000 workers have already lost direct employment in the textile industry alongwith an indirect employment loss of an equal number.

The problem of job loss can be gauged by declining exports of synthetic fabric from Surat. The Rs 25,000-crore synthetic textile industry of Surat used to export synthetic fabric to the tune of Rs 1,100 crore till a few years back. This has come down to around Rs 800 crore, following surge in the value of rupee.

Besides, Surat used to supply fabric to garment manufacturers of north India, including Delhi and Rajasthan but that too has come down by 60 per cent.

"Around 15 lakh jobs, both direct and indirect, would be lost in Surat," said a senior office bearer of Surat Textile Traders Association.