The Rs 13,000-crore knitwear industry at Tirupur in Tamil Nadu is faced with a peculiar problem. The export-based industry has been witnessing an uptick in enquiries and orders, but it is unable to accept all orders. Reason: unprecedented power cuts lasting eight to 10 hours a day.
With the industry reeling under frequent power cuts, mostly unscheduled, almost all units have been forced to run on gen-sets. This is a costly proposition for companies, because gen-set power costs Rs 18-19 for a unit, compared with the grid's Rs 6.50, industry sources said. Some units that could not afford to hire or buy gen-sets have downed shutters, they added.
This tiny city, which accounts for 60-70 per cent of India's knitwear industry, is situated on the banks of the river Noyyal. The industry provides employment to over 500,000 workers. Still, at any given point in time, there is a shortage of about 20,000 workers.
During the first half of the current financial year (April-September 2013-14), the industry reported a 29.7 per cent growth in exports at Rs 8,646.52 crore, compared to Rs 6,665.93 crore in the year-ago period. The growth in terms of foreign currency was 16.9 per cent.
The industry was flourishing until 2010, when the Madras High Court ordered the closure of dyeing units for allegedly polluting the Noyyal river. After this blow came the cotton shortage, followed by a sudden drop in orders from the world's major economies.
The dark clouds over the industry started clearing after the high court order was later revoked. However, the industry's prospects are dim owing to the large-scale load-shedding in Tamil Nadu. State Chief Minister J Jayalalithaa recently blamed Central government-owned generating stations and agencies for the sudden and unanticipated drop of about 2,500 Mw in generation.
A Sakthivel, president of the Tirupur Exporters Association, said that with China and other neighbouring countries becoming costlier owing to high costs of labour, infrastructure and various compliance issues, customers are keen on sourcing from India.
Major brands such as Disney have already diverted orders from other countries to India, which is now five per cent cheaper than China. This, along with India's strengths in quality, design, delivery and communication, also helps India attract more orders, Sakthivel added.
"We can easily close the current financial year with an export turnover of around Rs 17,000 crore," said Sakthivel, adding that the real challenges are cost of funds, a shortage of workers and the high cost of power.
According to Raja Shanmugam, managing director of Warsaw International, a supplier of polo shirts and casual wear to stores in the European Union and the US, the industry's prospects will be bright if day-to-day issues such as power cuts and labour scarcity are resolved.
While the production loss because of load-shedding is tangible, Shanmugam said the industry suffers intangible losses, too, on account of the damage to machinery caused by frequent outages.
According to him, Tirupurians have invested in windmills, which can produce around 1,200 Mw of power, while the industry's requirement is only 185 Mw. "But unfortunately, we are not able to use it due to poor grid connections," said Shanmugam.
K M Subramanian, managing director of K M Knitwear, one of the largest exporters in Tirupur, said that two years ago, a basic T-shirt used to cost Rs 12; today, it costs Rs 18 because of higher labour and power costs.
He noted that the industry is not able to convert enquiries into orders, owing to the power cuts. "Already, our deliveries are getting delayed by two-to-three weeks," he added.