Textile sector urged to add value

In order to sustain itself in the international market post quota regime, the Indian textile industry needs to create and preserve value in the fibre to consumer supply chain, states a recent study of KSA-Technopak, one of the world's largest consulting firm specialising in textile and apparel industry.

The Indian textile industry is expected to grow from $13 billion at present to over $50 billion in the next five years. The international textile industry, which is presently pegged at $360 billion, is expected to grow to $560 billion in the next five years.

Textile quotas will end on December 31, 2004, and 49 per cent of trade will become free. This will put the Indian textile industry under serious price pressure from imports.

After 50 years of protection, the textile market will open up in 2005. End of quotas was expected to lead to a shake-up in the sourcing sector.

Entry of more players would mean pressure on prices and a squeeze on lead times. "'Operational Excellence' would become a necessity to meet needs on price and lead times," Raghav Gupta, associate director, KSA Technopak, told Business Standard.

Almost all the categories that went off quotas a year ago witnessed a fall in sourcing prices by 10-20 per cent since then. The average free on board (FOB) price for robes, made from both cotton and manmade fibres, fell around 18 per cent.

Average FOB prices in infant and kids wear dropped by around nine per cent between January to May, 2002, against the same period last year.

The textile apparel chain was likely to experience retail consolidation, deflationary price trends after quotas end.

Between 2000-2002, total imports to US increased by around 9.5 per cent volumewise. Average unit price fell around by 8.5 per cent.

Textile firms could hope to gain market share either through improved products or reduced costs.

Improved productivity would lead to costs while improved products would sustain demand and lead to better margins.

Improvements could come from lower costs of distribution, manufacturing and business processes besides savings in logistics costs.

In spinning and weaving, manufacturing was the largest cost head. Operating levels were around 96 per cent on average for spinning and around 85 per cent in case of weaving units.

As a result, improving efficiency would be difficult without adoption of new technology.

Technological innovations in the processing sector were expected to lead to reduction of costs. The high cost of business processes in the value chain could be reduced to improve margins.

"While we are talking of further increasing efficiencies and preserving margins, an important aspect to be considered is how to add more value through the chain. The key is 'product innovation' by differentiating and adapting products to the needs of consumers for which they would be willing to pay more," said Gupta.