Surat textile industry still under subdued capacity utilisation

As against a 40 mn metres per day of production in the Rs 500 bn synthetic textile hub of Surat, the current production is down to 2.5 mn metres per day

While it may have played a crucial role in helping the ruling Bharatiya Janata Party (BJP) win the recently concluded Assembly elections in Gujarat, the Surat-based textile industry is still reeling under the goods and services tax (GST) impact.

According to industry sources, especially in weaving and trading, capacity utilisation at most of the power looms and trading units is still down by 50 per cent or lesser. While spinning units are finding takers in the knitting industry — which is currently doing better due to the winter season — the other verticals in the textile chain, such as weaving and trading, are still finding business unsustainable, especially among smaller players.

Against 40 million metres per day of production in the Rs 500-billion synthetic textile hub of Surat, the current production is down to 2.5 million metres per day. Similarly in the weaving sector, against a Rs 600-million daily turnover in the pre-GST era, the same is still down by 50 per cent, said Ashish Gujarati, president of Pandesara Weavers’ Association.

Moreover, power looms continue to shut shops, with roughly 250-300 looms being discarded as scrap daily, albeit at a slower pace than in October. 

Further, there are still several traders and weavers who are yet to register and come under the tax net.

“Smaller traders are still hit. The matter is not just about the 5 per cent GST the traders have to pay, it is about the additional costs of hiring accountants and investing in technology that is hitting the smaller traders’ pockets. This has led to a 50 per cent decline in business,” said Hitesh Sanklecha, one of the traders leading the demands on changes in GST in the Surat textile trading industry.

In normal circumstances, there are 650,000 power looms, 150-200 wholesale textile markets, 20,000 manufacturers — including 10,000 weavers, 75,000 traders, 450 processing units — and 50,000-60,000 embroidery machines in the Rs 500-billion synthetic textile hub of Surat.

According to Sanklecha, at least three different industry associations, including silk weavers and textile processors, have made representations to the Centre for relief from the impact of the GST on businesses.

The decline in business, as an impact of the GST, accentuated in the months of September and October when the industry apparently receives peak festive season orders. The peak Diwali season dispatch this year was only 15 per cent of normal in October.

Against a typical Rs 100-120 billion worth of business during Diwali through dispatch of 1,500 trucks daily for a fortnight, the same was down to mere 15-20 per cent.

“This was the first time we saw such a Diwali. In the last fortnight or so, which sees peak of Diwali dispatches, business was down by 15-20 per cent of a typical season,” Tarachand Kasat of the Surat-based GST Sangharsh Samiti and a leading textile trader told Business Standard.