Paradise recedes in textile boomtown

By Radha Venkatesan, IANS

Tirupur : The rising rupee and high bank interest rates have cast a pall over this tiny textile boomtown in south India. In a tale of paradise lost, Tirupur, which earned over Rs.110 billion in foreign exchange last fiscal, has lost big export orders recently and its 400,000 workers face distressing wage cuts.

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For the first time in the past three decades, Tirupur’s export growth rate has nose-dived into the negative. From a phenomenal 18 percent surge last fiscal, it has plummeted to minus 10 percent.

“It has never been so bad for exporters here. If the trend continues (rupee rises further), we will be in serious trouble. Already we have lost out on many big orders to Bangladesh and China because of the price differential,” Tirupur Exporters’ Association (TEA) president A. Sakthivel told IANS.

An estimated 60 to 70 percent of the garments manufactured in Tirupur, ranging from T-shirts to baby wear, is for the US market. For products sold to Europe, a majority of buyers pay in dollars.

A declining dollar therefore spells disaster. For instance, a T-shirt sold for $3 would fetch Tirupur exporters only Rs.117 now as against Rs.135 last year. With the dollar’s value slipping steadily, the exporters were left with no option but to quote a higher selling price compared to previous years. Result: Tirupur is losing some of its prime contracts to Bangladesh and China, which quote lower prices.

“We have lost three big contracts in the past three months and also suffered significant cuts in our profits. However, we will survive this season because of new contracts from Europe, but the threat is imminent,” said M. Ravi, managing director of Network Clothing Co, which specialises in kids’ garments with a turnover of Rs.1.3 billion last fiscal.

The loss of contracts and cut in profits are not limited to exporters alone.

In Tirupur, most exporters own only tailoring and designing units, and largely depend on the 5,500 processing units for spinning, dyeing, knitting, raising, compacting, drying and design printing.

With banks increasing interest rates and orders on the decline, these processing units that had invested in big machines are in bigger trouble.

Says Ahill M.S. Mani, who owns the Ahill Roopa Processing Mills: “Our monthly orders have come down drastically from around Rs.10 million to Rs.600,000. With a Rs.80 million bank loan and a monthly repayment commitment of Rs.1.5 million, my business future looks bleak.”

In the past few years, when exports were in a growth spiral, several processing units invested in capital-intensive machinery like the Rs.350 million stenter. Today most are finding it hard to even repay the monthly interests on their bank loans.

While the Indian Government has pitched in to support exporters by increasing their incentive drawback from seven to 10 percent, the processing units have been left in the lurch, rues Mani, who also heads the Tirupur Industrial Federation, an umbrella outfit for those engaged in processing.

Unless banks reduce loan interest rates and extend repayment periods, the processing units will face a survival crisis, he adds.

As for the daily wage workers, large-scale layoffs have yet to begin. Most of them have only lost one or two shifts a week. But exporters say it is likely to happen after the Diwali season.

The exporters’ association claims as many as 4,000 workers have already lost their jobs. But the workers’ unions vehemently deny it. “The situation is not so grim… The exporters are deliberately exaggerating the problem to deprive the workers of Diwali bonus,” insists M. Chandran, secretary of Centre of Indian Trade Union’s (CITU) hosiery workers wing.

“Workers required” notices are hung outside some of the garment units in Tirupur even now, but it is clearly hard time for south India’s Manchester.