Search for big money

The Indian textile industry needs Rs 1,94,000 crore over the next five years.

To become a $110 billion industry by 2012, the country's textile sector needs an investment of Rs 1,94,000 crore in its various divisions during the Eleventh Plan period 2007-12.

According to a study conducted by Crisil on the over $50 billion Indian textile and clothing industry, the processing division will need the largest chunk of the investment, followed by the spinning and the garmenting divisions.

The domestic market potential is estimated to reach $60 billion in 2012 from around $30 billion at present. To achieve this growth, the production output of the industry would be needed to be doubled by 2012 from current levels, says the study. 

SECTORAL BREAK UP OF INVESTMENT                                             (in Rs crore)
Sector	Investment
Spinning	55,000
Weaving	38,000
Knitting	10,000
Processing	51,000
Garmenting	40,000
Total	1,94,000

Presently, the overall spinning capacity of the industry is 29 million spindles. Investment in spinning (Rs 46,000 crore) would ensure adequate availability of yarn for significantly rising domestic consumption.

This increased investment on spinning (which was to be Rs 37,000 crore under 2010 vision) will also enable domestic value addition on cotton, of which the export is on the rise in the last two years. 

MACHINES REQUIRED IN VARIOUS SEGMENTS DURING THE NEXT FIVE YEARS
Sector	Fresh capacities needed
Spinning	20 million spindles
Weaving	1,34,600 shuttle-less looms + 2,01,600 other looms
Knitting	36,500 machines
Processing	468 process houses with 1 lakh mtrs per day capacity
Garmenting	2.7 million machines
Source : Crisil

"At the end of the Plan period, we shall have 55 million spindles. This is worked out on the basis of the textile vision that Crisil and the government have jointly formulated with $60 billion of exports and $75 billion of domestic consumption within the country," says Sudripto Roy, joint secretary, ministry of textiles.

On the back of rising textile consumption, Roy says, "Capacities have to be increased in terms of spindles, looms, knitting machines and garmenting machines."

Stressing on the garment segment, he says the industry should export finished value-added goods and not raw materials. Around 4 million people alone will be required for the garmenting division by 2012, he adds.

The overall investment in the industry would create an additional employment for14 million people (direct and indirect) by FY 2012.

The investment is expected to help in removing fragmentation in the industry, and to put a check on import dependence on processed fabric. The investment required can be met by options like equity and debt. According to an estimate, equity financing is expected to take care of 30 per cent of investment, and the rest will come through the debt route.

As per government estimates, the continuation of the Technology Upgradation Fund Scheme (TUFS) will ensure at least two-third to three-fourth of the required investments come from the domestic textile industry. In 2006-07, around Rs 30,000 crore is estimated to be sanctioned under TUFS.

According to J N Singh, textile commissioner, ministry of textiles, for the remaining investment (25-35 per cent), the industry would have to depend on foreign direct investment or even private equity players. The government is of the view that FDI will be required for high quality fabric manufacturing.

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SNIPPETS

Branding fund
Heeding to demand of cotton players for branding Indian cotton, the government has made provisions for a special corpus fund in the next Five Year Plan for branding.

Amidst rising Indian cotton export over the last two years, the issue of an India brand has been discussed over the last couple of months.

"The government has kept a particular fund this year for branding cotton in the Plan, which has been provided for the first time," says Sudripto Roy, joint secretary, ministry of textiles. However, he did not comment on the size of the corpus. He says, "Money will not be a constraint if it (process) succeeds."

However, how to go about it is not yet decided. "We have not yet decided who is going to look after it but at least we have made a beginning," he says.

Admitting the importance of brand, Roy says, "An India brand is important as a lot of Indian cotton is being shown as grown in other countries." He says, "Shankar is a very important brand. If it is branded (internationally), one would say if it is Shankar, it is from India."

In this connection, a two-day international conference on cotton was held in Mumbai last week focusing on the theme of India's place in the global cotton market.

K F Jhunjhunwala, president, East India Cotton Association, says, "We are trying to make a branded market so that the quality is standardised. Indian cotton is needed to be marketed globally, and that too properly."

Textile firms
A Crisil study suggests that textile firms should work closely with suppliers and customers to reduce the working capital cycle to release funds for capital investment. It also suggests the development of a database of designs.

This will help build a strong in-house knowledge database and develop competencies in catering to the needs of other buyers.Giving importance to brands, the study points out that firms should increase the share of branded exports from the country.