UP hosiery industry bogged down with troubles

Times could never be more testing for country’s third largest centre of hosiery manufacturers in Uttar Pradesh. The industry is battling with a host of problems including increased raw material costs, financing woes, power crunch and an increase in employees’ dearness allowance, which threatens to bring the manufacturing activity across the state to a near halt.

The prices of yarn, a key ingredient for hosiery manufacturers across the state have risen by almost 40 per cent in past few months forcing the traders to postpone orders as the demand seems to be drying up in the domestic market.

“Although we have increased the product rates by almost 15 per cent but the market does not seem to have absorbed the hike comfortably. The all round inflation in prices of essential commodities has reduced the purchasing power of our regular customesr who have now stretched their purse strings,” Balram Narula, managing director, Jet Eco told Business Standard.

There are other factors hampering the potential markets for the hosiery manufacturers though. The non availability of regular power supply across the state and especially in Kanpur, the largest hosiery manufacturing centre in the state has ensured that the units are never able to realize their production capacities.

“We have been told by the state government to make our own arrangements for generating adequate power or buy it from private firms like Torrent, Tata or Reliance. The situation is really weird as the basic infrastructure is gradually eroding off from the city, which still forms the third largest hosiery manufacturing centre of the country,” added Narula.

He says that many bigger players are facing tough times but do not talk about it due to the fear that banks and other lenders may take notice. Adding to the misery is the financing woes plaguing over 1500 small and medium hosiery manufacturers spread across the state especially Kanpur, Varanasi and Saharanpur.

Uttar Pradesh Hosiery Manufacturers Association (UPHMA) secretary, Manoj Banka says that the lack of easy and affordable rates of interest for the smaller players is turning the cards against their favour.

“Around 40 per cent of the smaller units have closed down production due to poor financing facilities coupled with a host of other problems plaguing the industry. If adequate measures are not taken within time, there are slim chances that the industry will survive,” he added.

In addition to this, the companies have started paying their staffers 20-35% more dearness allowance from this month on account of increasing inflation. “This will help employees fight food inflation, but dent margins,” said Narula.

“We have opted for lesser profit margins apart from price hike but any further increase in the cost of end products at this juncture would severely erode the buyer base in the price-driven global market. So, despite all odds we are continuing to operate on margins as low as 3 per cent,” explains Narula.