Industry
Why these texpreneurs are unable to capitalize on the shift from China and Bangladesh
Summary
- Global textile buyers are shifting away from China and more recently, from Bangladesh. This is leading to better oder flows for companies in Tamil Nadu, India’s largest textile exporter. And yet, factories in the state aren’t running at full capacity. Read on to find out why.
Coimbatore/Tiruppur/Erode: It was a call that made perfect sense. In November 2010, Narendra Modi, then the chief minister of Gujarat, visited Chennai and called on Tamil Nadu’s textile entrepreneurs to set up spinning units in his state. This was a time when Tamil Nadu was reeling under a debilitating electricity crisis. The power guzzling spinning sector, forced to depend on diesel generators, an expensive proposition, was hit hardest and suffered huge losses.
“Gujarat is one of the largest producers of cotton, which is then brought all the way to Coimbatore and spun into yarn. If spinning mills were established in Gujarat, transport costs could be reduced. We can capture the world," the prime minister declared while addressing entrepreneurs. The icing on the cake was the assurance of uninterrupted and quality power supply.
The textile industry, however, did not heed Modi’s call. Reason: Tamil Nadu still had a solid labour force and the ecosystem to produce yarn and other products efficiently.
Fifteen years on, the power problem has been resolved but the prospects of the textile units shifting from Tamil Nadu, but not necessarily to Gujarat, are more real than ever. That is because the challenges the sector faces today are far more severe than those in 2010, including an excessive dependence on migrant workers.
Worse, going forward, the availability of these workers is not guaranteed. For instance, Kumar Sharma (26), who came to Tiruppur from Bihar less than nine months ago, is already on his fourth job. And he’s still not happy. “I moved jobs to increase my pay," he says. “But I am now looking at getting a job in one of the mills that have come up in Madhya Pradesh or Odisha," he adds, as it will mean being closer to home.
The shortage of labour at any given time in the sector is 30% and it increases whenever there is a large inflow of orders, according to Prabhu Dhamodharan, convenor of the Coimbatore-based Indian Texpreneurs Federation (ITF). Automation can offer only limited relief. The wage bill of the sector is also proving unsustainable. The average wage increase in the last two-three years has been around 30%. The minimum wage for stitching in Tamil Nadu is ₹510 per shift of 10 hours but units in Tiruppur pay anywhere between ₹800 to ₹900 for 10 hours, depending on their urgency, says Alexander Job Neroth, director, NC John Garments Ltd, a company based in Tiruppur. Wages in Telangana, on the other hand, are ₹500-600 for a 10-hour shift, he adds.
That apart, the ecosystem that served the sector well is proving to be ineffective. The cluster model, which comprises thousands of small units specializing in different aspects of the textile value chain, appears to have reached its limit when it comes to being cost-efficient in the face of increased competition from Bangladesh, Vietnam and other countries.
Ironically, better order flows due to buyers shifting away from China and more recently, the crisis in Bangladesh, could spark an exodus from Tamil Nadu as entrepreneurs seek to take advantage of the opportunity. Take the case of NC John Garments Pvt. Ltd, a 200-machine unit in Tiruppur. In August the company recorded its highest-ever garment production thanks to strong orders. But it could operate only 70 of its own machines due to the non-availability of labour. “We had to outsource the work to two other units to meet the order," says Neroth. Margins were hit, and the company is now actively considering setting up a unit in Telangana.
There are other telltale signs. Hundreds of small units have shut down and many large units have put their expansion plans on hold. Those expanding are doing so outside the state, in Madhya Pradesh, Odisha and Telangana.
In other words, there is a huge cloud over the future of the textile sector in Tamil Nadu.
Rich legacy
Tamil Nadu prides itself on its rich textile heritage. It all began in 1910 when G. Kuppuswamy Naidu set up Lakshmi Mills in Coimbatore. Since then, the industry has come a long way. “What started off with spinning has expanded across weaving, knitting, dyeing and stitching," says Dhamodharan, “This diversification happened in a unique way. Clusters got created for each of these activities, comprising thousands of small units. Today, there are more than a dozen textile clusters in Tamil Nadu, every 50-odd kilometres," he adds.
Apart from these clusters, the industry also developed holistically. Today, almost all its needs are met locally—be it machinery, spare parts, facilities to train manpower or develop technologies to ensure sustainable manufacturing. “It was also an early starter when it came to renewable energy, investing heavily in wind and solar energy," Dhamodharan adds.
If there is one thing it lacks, it is access to raw materials. Just 278,000 bales of the 3,25,00,000 bales of cotton grown in India are produced in Tamil Nadu. In the case of manmade fibres (MMF), be it polyester or viscose, the entire need is sourced from other states. But this had not held back the sector.
According to Tamil Nadu government data, in 2023-24, the state accounted for 46% of India’s spinning capacity and over 50% of India’s yarn exports. It is also home to 70% of the country’s knitting capacity and 60% of total knitwear exports. More than 20% of India’s apparel exports are shipped from the state. Tamil Nadu employs over three million workers in the sector and accounts for $7.1 billion of the country’s $34.1 billion exports, making it India’s largest textile exporter.
But the sector’s legacy in Tamil Nadu, built over more than a century, is at stake. It is in a dichotomous situation today: on the one hand, there is a sharp increase in export orders; on the other, most units—large and small—are struggling to meet them efficiently.
Unsustainable dependence
Even at the turn of the century, local labour was available in abundance for textile units in Tamil Nadu. “Our core strength was workers. In the spinning mills, they were able to deliver products at the highest speeds. This meant a capacity utilization of close to 100%," says Gopinath Bala, managing director of Sri Venkatalakshmi Spinners Pvt. Ltd at Udumalpet, near Coimbatore. As the state’s educational standards improved, educated youth began to aspire for jobs in the services sector. A job where they could operate in air-conditioned offices and not in humid factories. “They desperately wanted to get away from the blue-collar tag," he adds.
This was so even if it meant lower salaries. “There were times when people used to queue up in front of our mill every day with recommendation letters," says Srihari Balakrishnan, managing director of Coimbatore-based Sri Kannapiran Mills Ltd. “Not anymore. But I get at least 600 walk-ins every month at a business process outsourcing (BPO) unit that I operate," he adds. Of the 2,200 workers in his mills, 1,800 are migrants. He pays a higher salary to workers at the textile mills than at the BPO.
Alcoholism is another reason. “No local worker wants to work in the evening shift. That is their drinking time," says A. Sethu, managing director, Master Linens Inc., a Karur-based home textile producer, and joint secretary, Karur Textile Manufacturer Exporters’ Association (KTMEA).
Migrants first entered the state’s textile sector in 2005, and within years the trickle turned into a flood. Today, workers from Odisha, Bihar, Uttar Pradesh, Madhya Pradesh, Jharkhand and Assam account for 70% of the labour. As their importance increased, the textile units began to take care of them better, even providing them with hostel facilities and food that they preferred. Their wages improved as well. Over time, the scales began to tilt. The migrant workers became more demanding, working fewer hours and going on extended annual breaks. “They became indisciplined and their efficiency dropped," says Bala. In 2016-17, he shut two of his spinning mills for this reason and shifted to technical textiles. “Spinning mills need to operate at close to 100% capacity to make money. We could barely do 80%," he says. NC John Garments’ Neroth agrees. “Earlier workers used to make 1,300 T-shirts in a 10-hour shift. Now, they make just 900—that’s a 30% fall in productivity," he adds. There is no loyalty—attrition rates exceed 40%.
Sunil Jhunjhunwala, founder of Tiruppur-based Techno Sportswear Pvt. Ltd, a local sportswear brand specializing in high-performance fabrics, recalls an incident in his factory. “We made an announcement that workers cannot bring alcohol into the hostel premises inside the factory. Within minutes more than 10 workers packed their bags to leave," he says. Despite providing facilities and taking care of the workers, attrition rates remain high. “It is proving to be difficult to tackle the issue of homesickness," says Sri Kananbiran Mills’ Balakrishnan. He is attempting something unique—re-settling workers in Tamil Nadu. “We bring the entire family, including the workers’ parents, offer them ₹10,000 to buy essential items, provide one month’s rent upfront, take care of the children’s education and offer medical benefits," he says. He has managed to resettle just 75 such families so far.
Limited automation
What the sector is realizing is that migrant workers will not be available forever. As their home states develop, and employment opportunities emerge there, they will go back. The textile sector’s people problems are only set to increase. What makes things worse is that the scope for automation is limited.
Pallipalayam, near Erode, is a cluster that produces 80% of the country’s viscose yarn. This cluster, which houses 60 spinning mills in just 5 square kilometres, has been facing a tough time due to cheaper imports and higher labour costs.
“I stopped a ₹50 crore expansion mid-way," says Ramesh Natarajan, executive director, AGT Mills, and president, The Indian Manmade Yarn Manufacturers Association. His company has incurred a cash loss of ₹25 crore in the last 26 months. Ramesh is instead planning to invest in more modern air jet spinning machines. “My need for labour will reduce from 125 workers to just 5 per machine. Also, my cost of production per kilogram will reduce by ₹10," he adds.
But not all segments of the textile sector have such automation options. Stitching, for instance, cannot do without human intervention. “Much of the automation has already happened and there is scope for only incremental gains," says ITF’s Dhamodharan.
Integrated setup
The other option is to become a fully integrated unit. One that houses spinning, dyeing, weaving and stitching operations all under the same roof. “Large buyers are increasingly preferring integrated units as they are globally competitive, deliver assured quality, and the buyers’ compliance needs reduce as they do not have to deal with too many vendors," says RM Lakshman Narayan, director, Theni-based Maneka Mills Pvt. Ltd.
But Tamil Nadu’s textile sector is dominated by clusters comprising thousands of small units. These clusters have outlived their utility as global competition requires products delivered at very competitive rates. Unable to do this, many small units have shut down.
Converting into an integrated unit is not easy as most outfits are too small, with little financial and managerial clout to scale up. “The biggest hurdle is the mindset of the small entrepreneurs. They do not see the writing on the wall and refuse to change," says KTMEA’s Setu.
The shift
This is forcing exporters to set up large capacities outside these clusters. For instance, Erode-based ARS Exports has traditionally exported fabrics that were made by these small units on a contract basis. “The inability of these units to modernize their operations in line with global needs is forcing us to consider setting up a unit in Surat with high-tech machines," says R. Arjun Sethu, its chief executive officer.
Gokuldas Exports, a leading apparel exporter, is setting up a facility just outside Bhopal in Madhya Pradesh (MP). Shahi Exports is setting up an apparel unit near Indore (MP); Page Industries, maker of the Jockey brand of innerwear, has invested ₹290 crore on two units in Telangana; and Tiruppur-based Best Corp. is investing ₹60 crore to set up a unit near Ujjain (MP). Welspun’s integrated textile unit has begun operations in Cuttack, Odisha, employing 10,000 workers. Kitex, which moved from Kerala, has already commenced operations in Telangana.
Large units are flocking to these states as they offer attractive incentives. “Considering the incentives and facilities on offer, I can set up a unit in Telangana at a cost of ₹7 crore. A similar facility in Tamil Nadu will cost ₹40 crore," says Neroth.
Such developments will eventually lead to the death of textile clusters. “The clusters that we have in Tamil Nadu are proven ones and we should find a way to help them stay relevant. Otherwise, they will be doomed," says Raja M. Shanmugam, chairman of Warsaw International, an apparel export firm, and former president of the Tiruppur Exporters Association.
Given the textile sector’s importance to the state’s economy, the Tamil Nadu government has taken care of its needs in the past. It needs to step in once again to ensure that the industry not only survives but thrives. A vibrant textile sector is critical for the state to achieve its dream of becoming a trillion-dollar economy by 2030.
