Mills in the textile capital of Ahmedabad are weaving a novel strategy to cut down additional cost burden.
While bigger textile companies may be able to sustain their growth despite high input costs, smaller mills, which are reeling under higher costs and lower margins have begun shutting their in-house weaving operations and outsourcing them instead.
M H Mills Ltd., for instance, has begun outsourcing around 5-6 lakh metres of grey cloth for weaving, after closing down its operations. The mill had earlier taken up several cost cutting measures including labour rationalisation.
"Several mills like us are not able to sustain and carry the rising burden due to fuel price hike, power tariff hike and other inputs. It has now become feasible instead to outsource the job work of weaving to weavers outside and lessen our operating costs," said Biren Parikh, managing director of M H Mills Ltd.
Ever since the mill began outsourcing, it has been able to earn an additional revenue of Rs 75 lakh per month from weaving, thereby easing the cost pressure.
The trend is believed to be seen in other mills as well, said Ratibhai Shah, president of Maskati Cloth Market Association.
"Weavers in Ahmedabad imported looms under the Technology Upgradation Fund Scheme (TUFS) and improved their quality. With the availability of job work and increasing overheads, mills have found outsourcing a better option," said Shah.
However, according to Abhinava Shukla, the mills will outsource low quality and high volume operations.
"Textile players like M H Mills, Soma Textiles and others will not outsource weaving jobwork that require high quality and outsource only low quality - high volume operations," said Shukla.
Apparently, by outsourcing weaving work these mills tend to save anywhere between 5 per cent and 10 per cent of their costs. Moreover, it has brought good news for the weavers as well since their margins have become better from 2.5 per cent to 5 per cent.
