An Assignment on

MAN MADE FIBERS INDUSTRY: Spinning its Fortune

SUBMITTED TO Dr. J K Sharma Professor

SUBMITTED BY Aditya Singh MBA Finance

Department of Business Administration, University of Lucknow

INTRODUCTION
Man-made fiber are those fibers whose chemical composition, structure, and properties are significantly modified during the manufacturing process. Man-made fibers are spun and woven into a huge number of consumer and industrial products, including garments such as shirts, scarves, and hosiery; home furnishings such as upholstery, carpets, and drapes; and industrial parts such as tire cord, flame-proof linings, and drive belts. The chemical compounds from which man-made fibers are produced are known as polymers, a class of compounds characterized by long, chainlike molecules of great size and molecular weight. Many of the polymers that constitute man-made fibers are the same as or similar to compounds that make up plastics, rubbers, adhesives, and surface coatings. Indeed, polymers such as regenerated cellulose, polycaprolactam, and polyethylene terephthalate, which have become familiar household materials under the trade names rayon, nylon, and Dacron (trademark), respectively, are also made into numerous non fiber products, ranging from cellophane envelope windows to clear plastic soft-drink bottles. As fibers, these materials are prized for their strength, toughness, resistance to heat and mildew, and ability to hold a pressed form. Man-made fibers are to be distinguished from natural fibers such as silk, cotton, and wool. Natural fibers also consist of polymers (in this case, biologically produced compounds such as cellulose and protein), but they emerge from the man made fiber manufacturing process in a relatively unaltered state. Some man-made fibers, too, are derived from naturally occurring polymers. For instance, rayon and acetate, two of the first man-made fibers ever to be produced, are made of the same cellulose polymers that make up cotton, hemp, flax, and the structural fibers of wood. In the case of rayon and acetate, however, the cellulose is acquired in a radically altered state (usually from wood-pulp operations) and is further modified in order to be regenerated into practical cellulose-based fibers. Rayon and acetate therefore belong to a group of man-made fibers known as regenerated fibers. Another group of man-made fibers (and by far the larger group) is the synthetic fibers. Synthetic fibers are made of polymers that do not occur naturally but instead are produced entirely in the chemical plant or laboratory, almost always from by-products of petroleum or natural gas. These polymers include nylon and polyethylene terephthalate, mentioned above, but they also include many other compounds such as the acrylics, the polyurethanes, and polypropylene. Synthetic fibers can be mass-produced to almost any set of required properties. Millions of tons are produced every year.

Classification of the industry

The norm ISO 2076-1999 (E) provides a list of the denominations commonly used to designate the different categories of man-made fibers which are usually produced on industrial scale for man made fiber uses and other applications. Every common denomination is defined through attributes, normally based on chemical differences expressed with chemical formulas, which often have different distinctive properties.

Scope of the industry

The Man made fiber industry in India traditionally, after agriculture, is the only industry that has generated huge employment for both skilled and unskilled labor in man made fibers. The man made fiber industry continues to be the second largest employment generating sector in India. It offers direct employment to over 35 million in the country.India is the second producer but India will lead in all . According to the Ministry of Man made fibers, the sector contributes about 14% to industrial production 4% to the country's gross domestic product (GDP) and 17% to the country's export earnings. The share of man made fibers in total exports was 11.04% during AprilJuly 2010, as per the Ministry of Man made fibers. It is estimated that India would increase its man made fiber and apparel share in the world trade to 8% from the current level of 4.5% and reach US$80 billion by 2020. During 2009-2010, Indian man made fibers industry was pegged at US$55 billion, 64% of which services domestic demand.

Production in India
India is the second largest producer of fibre in the world and the major fibre produced is cotton. Other fibers produced in India include silk, jute, wool, and man-made fibers. 60% of the Indian man made fiber Industry is cotton based. The strong domestic demand and the revival of the Economic markets by 2009 has led to huge growth of the Indian man made fiber industry. In December 2010, the domestic cotton price was up by 50% as compared to the December 2009 prices. The causes behind high cotton price are due to the floods in Pakistan and China.India projected a high production of man made fiber (325 lakh bales for 2010 -11). There has been increase in India's share of global man made fiber trading to seven percent in five years.The rising prices are the major concern of the domestic producers of the country.

ISSUES AND CONCERNS

Excise duty discrimination: A major concern area has been the historical discrimination of man-made fibers and man made fibers against cotton and cotton man made fibers in the form of higher excise duties. Although there has been substantial reduction in excise duties on man-made fibers and man made fibers during the last 10 years, the current duties on MMF and MMF man made fibers are still high; while cotton is exempt from excise duty, MMF attracts excise duty of 8%. Further, while MMF man made fibers attract a mandatory CENVAT of 8%, cotton man made fibers have an optional CENVAT of 4%. Any reduction in excise duties on MMF and MMF man made fibers will have a highly positive impact on the growth of MMF consumption. Lack of global competitiveness: Indian man-made fibers man made fiber industry has not been able to create a mark in the global man made fibers market post dismantling of man made fiber quotas even though cotton man made fibers industry has witnessed a substantial growth. Since dismantling of quotas (2005 onwards), Indian cotton apparel exports to the world have grown at about 10.7% CAGR, while MMF apparel exports have witnessed a decline. Limited number of players: There are only a few big players manufacturing man-made fibers in India. The industry follows a pricing policy on import parity basis at landed cost. User industry has submitted that MMF producers export man-made fibers at lower prices than in the domestic market. This submission is supported by SRTEPC exports data analysed by FIASWI in respect of polyester fibre and yarn.

Levy of anti-dumping duties: Indian MMF man made fiber manufacturers are also
faced with higher fibre prices as against their global counterparts on account of levy of anti-dumping duties on imports of majority of man-made fibers. This in turn affects the availability of fibers to MMF man made fiber manufacturers at competitive prices.

Lack of indigenous production of specialized MMF: Various specialised man-made

fibers (like acetate/ tri-acetate, cuprammonium filament yarn, nylon 66, nylon 11, spandex, etc) are not being manufactured in India despite having huge potential and thus have to be imported by the weavers. High customs duty: Another factor that has contributed to higher costs of man-made fibre manufacturers and thus for man-made fibre man made fiber manufacturers is the high customs duty on certain raw materials required for man-made fibre industry. Certain raw materials and additives used in the production of man-made fibers are necessarily imported on account of limited domestic production/ lack of requisite quality. Some of these raw materials and additives like rayon grade wood pulp (used for manufacture of viscose fibre), titanium di-oxide and spin finish oil (used as additives for manufacturing polyester) attract high customs duty, while the same are either exempted or have lower customs duty in major competing countries. To enable a level-playing field with the

global counterparts in the international export markets and to reduce the key input costs of man-made fibre manufacturers, it is desired that customs duty on such inputs are exempted. Since these items are largely imported due to shortage in domestic market, reduction in import duties on same is not likely to hurt the domestic manufacturers of these items. High debt servicing cost: Another reason for relatively higher costs of man-made fibre/ filament yarn manufacturers vis--vis the cotton man made fiber manufacturers and global counterparts is the high debt servicing costs of the former. The lending rates in India are in the range of 11% - 13.5% (IBA Website) and are significantly higher in comparison to competing countries like China (5.04 6.12% ; Source : Bank of Communication, China) and South Korea (5.72 6.33%), which contributes to much higher interest costs for Indian MMF manufacturers vis--vis counterparts in competing countries. Further, concessional schemes like TUFS is not applicable for manufacturing synthetic fibers, which puts this capital intensive MMF industry at a great disadvantage vis--vis the cotton man made fiber industry. GST issues for man made fiber industry: Major tax reforms are expected in the form of Goods and Services Tax (GST), which is likely to be introduced next year. However, man made fiber industry has a major concern with respect to GST. The man made fibers industry involves a lot of inter-state transfers especially at the fabric stage. Due to long supply chain in the man made fiber industry involving traders in various cities, towns, etc, the inter state transactions are likely to take place among the organised players who are above the threshold limit for GST exemption and small decentralised traders who are exempted from payment of GST. Consequently, the regular payee (one above threshold limit) would not get any credit for purchases from small decentralised trader but shall have to pay full duty on the sale price.

List of players Grasim Industries Reliance Industries Indo Rama Synthetics JCT Fiber India Acrylic Pashupati Acrylon Vardhman Acrylics Zenith Fber Century rayon Kesoram Rayon JBF Industries Gujarat State Fertilizers

Indian Scenario
India is the second largest producer of man-made fibers in the world (World Fibre Report 2008), with production of 2.50 billion kg of man-made fibers in FY09. The man-made fibers produced in India include polyester (staple fibre as well as filament yarn), viscose (staple fibre as well as filament yarn), acrylic (staple fibre), nylon (filament yarn) and polypropylene (staple fibre as well as filament yarn). India is the second largest producer of PSF, PFY, VFY, third largest manufacturer of VSF and eighth largest manufacturer of ASF

CHANGING FIBRE COMPOSITION The Indian man made fibers industry is

predominantly cotton oriented with cotton accounting for 59 percent share of total fibre consumption. However, globally the fibre consumption ratio is reverse, with MMF constituting 60% of fibre consumption. Globally, consumption of fibers has tilted in favour of MMFs over cotton due to various factors like changing fashion trends coupled with limitations to production of cotton. Even in India, the demand for man-made fibers has grown substantially over the last decade, as it has emerged as a major substitute for cotton. The demand for synthetic man made fibers has been growing due to its lower cost coupled with convenience and maintenance benefits associated with the usage of synthetic garments. The share of man-made fibers in total fibre consumption (cotton and MMF) has risen from 25% in early nineties to 41% at present.

POLYESTER ACCOUNTS FOR LARGEST SHARE IN MMF During the last ten years,
demand for man-made fibers has grown at a CAGR of around 3% from 1.6 million kg (FY99) to 2.4 million kg (FY09). Amongst all fibers, polyester filament yarn has recorded the highest growth of over 6% per annum. Steadily declining prices of PFY have been one of the major factors pushing its demand in the domestic market. Huge capacity additions during the post quota period have also helped in increasing the supply of PFY in the market, thereby pushing down the prices and hence increasing the demand. Also,rising cotton prices coupled with increasing exports of cotton and cotton based man made fibers helped polyester industry to capture some of the domestic market share from cotton.

EXCESS CAPACITIES Indias manufacturing capacity (functional installed capacities)

for man-made fibers at present stands at 3.4 billion kg (FY09), of which polyester accounts for 82.9%, followed by viscose with 11.6% and remaining is of other man-made fibers. Indias manufacturing capacities for all man-made fibers at present is more than adequate to meet the domestic demand.

RAW MATERIALS AVAILABILITY The availability of rayon grade wood pulp for
manufacturing viscose is a challenge in comparison to paper-grade pulp as margins in case of latter are better. Moreover, wood pulp industry is subjected to various environmental regulations across the world and these can be expected to increase in future in the wake of changing climatic conditions. Further, for exports purpose industry

players usually import wood pulp as the quality of imported raw material is superior. Thus, future availability of rayon grade wood pulp is an area of concern and could affect the growth of viscose fibre industry.

PRICE MOVEMENT OF MMF Over the last decade, prices of key man-made fibers
like PSF and PFY have seen a steady decline, which has contributed to higher demand for same. One of the reasons for reduction in prices is the capacity build-up leading to economies of scale for key MMF manufacturers and gradual reduction of excise duty.

Future Demand in the Industry

Currently, India has excess capacities for many man-made fibers/ filament yarns and these are adequate to meet the current and near future demand for man-made fibers. However, given the changing consumer pattern in favour of man-made fibre based man made fibers, there is a need to assess the medium term and long-term demand for man-made fibers in India. The demand for man-made fibers depends upon the demand for yarns and fabrics, which in turn depends upon the consumption of finished man made fibers viz. apparel and made-ups. Thus, in order to determine the future requirements for man-made fibers/ filament yarns, we first need to assess demand for fabrics and finished man made fibers made from man-made fibers, both for the domestic market as well as exports. A top-down approach has been followed to determine the demand for man-made fibers in FY15 and FY20. We have considered three scenarios, namely GDP growing at 7%, 8% and 9% respectively for the next ten years. The share of private final consumption expenditure is taken as 67%, in line with the average share over the past five years. The Eleventh five year plan report of the planning commission for Man made fibers and Garments considers the share of man made fibers and clothing in PFCE to be around 5.5% for FY08. It has been observed that over the past few years, the relative share of man made fibers and clothing in total PFCE has come down due to increased private expenditure on transport and communication, education, recreation, etc. Thus, we have considered the share of man made fibers and clothing in the PFCE to be 5.3% for FY15 and 5.1% for FY20.

Major producer countries of MMF (2007) Fibre PFY PSF Nylon VSF ASF VFY Acetate
Source: World Fibre Report 2011

Country China, India, Taiwan, South Korea, Indonesia China, India, USA, Pakistan, South Korea China, USA, Taiwan, South Korea, Germany China, Indonesia, India, Taiwan, Thailand China, Turkey, Japan, Germany, Taiwan China, India, Japan, USA, Czech Republic USA, Japan, Spain

Source: Fiber Economic Bureau (FEB)

PEST ANALYSIS
Political Analysis
The political scenario of the industry is quite stagnant but do pursue a continuous series of actions to uplift the sector and betterment of it. Some of them are as follows The 47th congress, held in September 2008, closed with a record attendance of more than 720 visitors from 40 countries. Main topics included new fiber developments, sportswear, safety, technical man made fibers and nonwovens. However, the overarching subject was sustainability, with the focus on cradle-tograve products. Industrial houses have demanded east UP to be declared a tax free zone to make it an attractive destination for the industries. The region happens to be a hub of cottage industries which produce a large number of export oriented products and also employ nearly 42 lakh people. These industries contribute nearly 2000 crore of foreign currency into the government's treasure. But the higher tax proves to be an impediment for these industries. A member of Central Silk Board said that in states like Uttarakhand, industries get relaxation in the excise duty and VAT. Because of this the industries are flourishing very well in the hill state. Industries are also growing rapidly in other states which are giving relaxation in taxes. On the other hand, there are certain industries in Uttar Pradesh which have to pay entry tax along with the VAT. The man made fiber industries have to import their basic raw materials such as cotton yarn, silk yarn, plastic yarn etc. Madhya Pradesh has to attract Rs 10,500 crore investment towards the man made fiber industry for increasing its installed spindle capacity to 5% at 27.5 lakh spindles of from the present state share of 4% by the end of the 12th Five Year Plan, said state level working committee on integrated development of man made fiber industry. The international man made fiber and apparel fair scheduled to take place from November 22 to 25 in the city is expected to provide domestic companies a global platform as buyers from 58 countries have confirmed their visit to the event. Besides, four states have also sent their consent to participate in the event. The fair 'Vastra - 2012' supported by Union ministry of man made fiber and to be organized by RIICO and FICCI Several proposals like reduction in excise duty on yarns, widening of man made fiber upgradation fund, slashing of customs duty on import of machinery and a special package for the powerloom sector with many welfare measures for the workforce, as announced on Friday, have made Union minister of man made fibers Kashiram Rana a happy man, especially as he is the Member of Parliament from here.

Legal Analysis
Ministry of Man made fibers, Government of India , handles the various regulatory authority for this manmade fiber industry.

Labour laws of Indian T&C industry: T&C industry comes under the purview of Contract Labour Act, 1970 which prohibits contract labour for the work that is perennial in nature: The Factories Act, 1948 poses restrictions on the maximum working hours which further affects the competitiveness of industry Indian Labour laws introduce unfair discrimination against large companies Anomalies in Taxes and Duties VAT and CST are not adjustable: If a manufacturer while purchase in raw-materials has paid VAT and while selling collects CST, he cannot avail a credit. Exporter does not get credit for VAT/CST paid during raw material purchase: When a manufacturer exports all his goods he does not get any credit for the VAT or CST paid at the raw material purchase stage. Customs paid while purchase and Excise collected while sale are not adjustable: If a manufacturer imports raw material and pays customs duty on it, he is unable to adjust it against the excise that he collects while selling. VAT on fabric is Nil: A fabric manufacturer pays VAT while buying the raw material but cannot collect the same while selling his product. Anomaly in duty draw back rates: Duty draw back rates are not as high as effective duties as a result T&C exporters pay excessive duties. The Trade Agreements Leading to Market Access for Readymade Garments LTA underwent several renewals and was subsequently replaced by the Multi Fiber Agreement (MFA) in 1974. MFA has governed international trade in man made fibers and clothing since 1974. The MFA enabled developed nations, mainly the USA, European Union and Canada to restrict imports from developing countries through a system of quotas. The Agreement on Man made fibers and Clothing (ATC) to abolish MFA quotas marked a significant turnaround in the global man made fiber trade. The ATC mandated progressive phase out of import quotas established under MFA, and the integration of man made fibers and clothing into the multilateral trading system before January 2005. Preferential Trade Agreement The General System of Preferences (GSP) is an agreed exception to the MFN principle under which the Donor Country grants preferential duty on goods originating in beneficiary country which is lower than the normal MFN duty. Each donor country is free to decide the level of concessions, the choice of goods and the rules of origin in respect of GSP. Consequently, most GSP schemes are different from each other in terms of the goods covered, the level of duty concession, the procedure to be used and the rules of origin that apply.

Zero-for-Zero Tariff offered to India Looking to opportunities in the vast Indian market, both EU and USA have offered India zero for zero tariffs. Since labour costs in both USA & EU are higher than in India and since freight/insurance costs will add further to the landed value in India for their garments, the possibility of EU/USA garments swamping India or competing unfairly with our domestic industry is remote. The only possibility is that garments manufactured by East European countries of EU or by Turkey (an Associate of EU), could possibly compete with our domestic industry. Although operating costs in East Europe or Turkey may be low, freight to India and insurance costs will neutralize whatever advantage (if any) they may have. The gain accruing to India by agreeing to a zero-zero tariff would be commendable. 2011-12 Budget Measures i. Rs 30 billion funding to NABARD to provide support to financially unviable handloom weavers with huge debt burdens. ii. Optional tax levy at 10% made mandatory on branded garments and made ups. iii. Surcharge on domestic companies reduced to 5% from 7.5%. iv. Basic customs duty on nylon yarn and nylon fibre reduced from 10% to 7.5%. v. Lower rate of central excise duty increased from 4% to 5%. vi. Rate of Minimum Alternative Tax (MAT) proposed to be increased from 18% to 18.5% of book profits.

Environmental Analysis
Man made fiber processing industry is characterised not only by the large volume of water required for various unit operations but also by the variety of chemicals used for various processes. There is a long sequence of wet processing stages requiring inputs of water, chemical and energy and generating wastes at each stage. The other feature of this industry, which is a backbone of fashion garment, is large variation in demand of type, pattern and colour combination of fabric resulting into significant fluctuation in waste generation volume and load. Man made fiber processing generates many waste streams, including liquid, gaseous and solid wastes, some of which may be hazardous. Air pollution Most processes performed in man made fiber mills produce atmospheric emissions. Gaseous emissions have been identified as the second greatest pollution problem (after effluent quality) for the man made fiber industry. Speculation concerning the amounts and types of air pollutants emitted from man made fiber operations has been widespread but, generally, air emission data

for man made fiber manufacturing operations are not readily available. Air pollution is the most difficult type of pollution to sample, test, and quantify in an audit. Point sources: Boilers Ovens Storage tanks Diffusive: Solvent-based Wastewater treatment Warehouses Spills

Source: http://www.indianman made fiberjournal.com/articles/FAdetails.asp?id=2420

Water pollution The man made fiber industry uses high volumes of water throughout its operations, from the washing of fibres to bleaching,dyeing and washing of finished products. On average, approximately 200 litres of water are required to produce l kg of man made fibers (Table 3). The large volumes of wastewater generated also contain a wide variety of chemicals, used throughout processing. These can cause damage if not properly treated before being discharged into the environment. Of all the steps involved in man made fibers processing, wet processing creates the highest volume of wastewater. Solid waste pollution The primary residual wastes generated from the man made fiber industry are non-hazardous. These include scraps of fabric and yarn, off-specification yarn and fabric and packaging waste. There are also wastes associated with the storage and production of yarns and man made fibers, such as chemical storage drums, cardboard reels for storing fabric and cones used to hold yarns for dyeing and knitting. Cutting room waste generates a high volume of fabric scraps, which can often be reduced by increasing fabric utilisation efficiency in cutting and sewing.

Source: http://www.indianman made fiberjournal.com/articles/FAdetails.asp?id=2420

Social Analysis
The man made fiber industry is the largest industry of modern India. It accounts for over 20 percent of industrial production and is closely linked with the agricultural and rural economy. It is the single largest employer in the industrial sector employing about 38 million people. If employment in allied sectors like ginning, agriculture, pressing, cotton trade, jute, etc. are added then the total employment is estimated at 93 million. The net foreign exchange earnings in this sector are one of the highest and, together with carpet and handicrafts, account for over 37 percent of total export earnings at over US $ 10 billion. Man made fibers, alone, account for about 25 percent of Indias total forex earnings. On January 1st, 1974, the Arrangement Regarding the International Trade in Textiles, otherwise known as the MFA came into force. It superseded all existing arrangements that had been governing trade in cotton textiles since 1961 Exporters in India fear that freer imports could lead to dumping of low-cost fabrics from China and other Southeast Asian countries. Thus, the industry needs restructuring on all fronts. Although the policy framework can be blamed partially for its ills, internal factors are equally important.

Recommendations

The government also needs to make policy changes like dereserving the small-scale sector so that it can achieve economies of scale and adopt a synergistic approach. Human resource is another area of focus. The workforce must be trained and oriented towards high productivity The business environment of the future will be intensely competitive. Countries will want their own interests to be safeguarded. As tariffs tumble, non-tariff barriers will be adopted. New consumer demands and expectations coupled with new techniques in the market will add a new dimension Possible Indo-German Co-operation in Textiles o Managerial training to encourage adoption of techniques like JIT, Quick Response Systems o Promoting hand-made articles by improving quality of raw materials and introducing machinery where possible in the process so as to maintain standards of quality and design o Helping firms build close relationships with customers o Training centres

o Improvement of synthetic fibre-base to reap economies of scale, use of genetic engineering, bio-technology, and cellular biology in both natural and synthetic fibre-base

Technological Analysis
Textile fairs held every year showcase new technology and development that has taken place in the industry including weaving, knitting, testing, printing and dyeing. Technical textiles offer an excellent opportunity not only for the revival of the Indian textile industry but also a new direction, new ways and means to sustain and thrive in the near future. An average of 7% growth in technical textiles is expected during the period from 1999-2010. It is expected to reach US$11 million by year 2010 from US$42 million in 2000. The structure of the textile industry is extremely complex with the modern, sophisticated and highly mechanised mill sector on the one hand and the handspinning and handweaving (handloom) sector on the other. Between the two falls the small-scale powerloom sector. The latter two are together known as the decentralised sector. Post-MFA / ATC Scenario It is generally believed that quota phase-out can only be beneficial for the industry. In 1993, a study of seven countries found that the price of cotton yarn per kilo, was cheapest in India at US$ 2.79, compared to US$ 3.30 in Brazil, US$ 4.19 in Japan, and US$ 3.10 in Thailand. This was because overall labour and raw material costs are cheaper in India. However, it should be realised that the opposite can also happen. Removal of quotas may open new frontiers but will also close captive markets. The EU and the US will no longer be restrained in buying as much as they want from the cheapest possible sources. Some argue that the ending of quotas will result in cut-throat competition between developing countries. Coupled with this is erosion in the growth of markets in industrial countries. Apparent consumption of textile products, in real terms, remained stagnant during the decade 1985-95. Purchases become discretionary and fashion-driven. As a result, fashion cycles got shorter and order-cycles compressed. Retailers order requirements on short-order cycle term and demand rapid responses to in-season ordering. Hence, they are compelled to secure their supplies of top-up orders from those in close vicinity. There is, therefore, a propensity towards sourcing from low-cost countries in the neighbourhood as also a growth of offshore processing by manufacturers in developed countries. Regional integration reinforces this.

Further exporters in India fear that freer imports could lead to dumping of low-cost fabrics from China and other Southeast Asian countries. Thus, the industry needs restructuring on all fronts. Although the policy framework can be blamed partially for its ills, internal factors are equally important.

Recent studies indicate that India is beginning to lose out to its rivals. In one survey of US textile and apparel imports, China and Hong Kong had higher market shares than India. In certain categories, other Asian low cost producers like Pakistan and Indonesia had higher market shares and had emerged as close competitors to India. Because many of these countries depend on imports, however, India can take advantage of home production. Further, formation of NAFTA means direct competition from the Latin American countries. The United States has farmed-out offshore processing work to enterprises in Mexico and the Caribbean Base Initiative countries. Similar relocation has taken place in Europe with manufacturers shifting base to Eastern Europe, which provides similar advantages of cheap labour and proximity. The weakest links in the entire chain are the powerlooms and the processing houses. The latter especially are very important because they are responsible for the highest value addition in the manufacturing line. A powerloom co-operative structure could be evolved for pooling of common services and functions such as quality testing, marketing, short-term financing, etc. Further, because of the geographical proximity enjoyed, a cluster approach can be adopted. India has made little attempt to forge partnerships in equity, technology and distribution in overseas markets. The newer nuances of global apparel trade demand joint control of brand positioning, distributing and quality assurance systems. Areas of Co-operation Technological upgradation (egs. Effluent treatment plants, energy saving devices, and other machinery related directly to the production process like spreading, cutting, finishing, etc.) Development of textile-specific software for India, Computer-Aided Textile Designing, aiding IT integration Usage of EPS (Electronic Point of Sale) software Adoption and adaptation of state-of-the-art information technology in enterprise resource planning so as to pre-empt non-tariff barriers which curtail markets for the Indian textile industry Improvement of synthetic fibre-base to reap economies of scale, use of genetic engineering, bio-technology, and cellular biology in both natural and synthetic fibre-base

Growth Drivers
There is huge competition between the manmade fiber industry that cause and provokes the whole industry to grow in various distinctive products and new technological edge over each other Consumer are in always mood of getting a change and always ready to experiment with new products causing the industry to launch new ideas and put extra effort to enhance its position in Indian market Due to increased purchasing power of Indian population, they are able to afford a newly fresh idea of various products from manmade fibers. Even this causes the regular research and development in the industry Legal panorama is also being loosen on the behalf of textile industry so that the quality raw material can be easily imported to the nation and better products can be launched

The Value Chain

The Indian Textile Industry is highly fragmented, with the possible exception of spinning, and is spread over the entire country. This fragmentation, which is the evolutionary legacy of the industry, is not all negative. Instead, it is also possibly the industrys strength as it has made it very flexible and adaptive to changing fashions. Its strength lies in the manufacture of medium-quality and high fashion ready-made apparel with value added work (like embroidery) produced in small lots for niche segments of the domestic and export markets. Ready made garments contribute the bulk of the textile exports (approx 45%), followed by fabrics, made-up?s and yarn. EU and the US are the largest destination for the textile exports from India. US accounts for around a quarter of textile exports from India, thus making it the single largest importer of textile goods.

SWOT Analysis
Strength
Abundant raw material availability

Allows the industry to reduce costs and lead times India is one of the largest producers of natural and man made fibres Low cost skilled labour Provides a competitive advantage for the industry Hourly wage comparison India 0.69 England 14.24 Italy 15 Japan 26 Spain 8 Growing domestic market

Low per capita consumption of textiles so lots of scopefor growth. Global average-6.8 , U.S 20 Japan 12, India 2.8 It is extremely sensitive to fashion trends and fads

Cases Arvind mills: increasing its cotton shirting production from 27 million meters to 34 million meters, thus making excellent use of abundant raw materials. Madura garments: small cities are also getting fashion conscious so MADURA GARMENTS have started setting up exclusive retail outlets in second rung cities like thanjavur and trichy

Weaknesses
Fragmented industry o Reduces the ability to expand as few sectors influence the whole industry o In fabric, large section of the industry is in the power loom and handloom sector. o Power loom sector- 63% o Handloom sector -19% o Mill sector -14% o Hosiery sector- 11% Historical regulations

Absence of a viable exit option for industry players. Certain sectors are reserved for SSIs like garmenting and knitting. Case:Abhishek industry whose major business comes from exports has tied up with foreign firms like Gruppo Zambiati and Nautika to share their technology and R&D information

Opportunities
Global textile industry is likely to grow from US$ 309 billion to US$ 856 billion by 2014 Market share of India now is only 4% , so huge scope of expansion is present Indian companies need to increase focus on new products Increase usage of CAD and Trends forecasting to improve efficiency Case: Welspun India has ties with 12 of the top 20 retailers in the world namely Wal-Mart,JC Penny, Target thereby exploiting the opportunities

Threat
Iincreased competition Increase in competition due to entry of lower priced imports , who have a better brand name. Ecological and social awareness Issues such as polluting dyes, child labor, unhealthy Working conditions are in the firing line of the industry. Standards like SA 8000 are being implemented in the industry, resulting in increased pressure on the industry

Porters Five Forces Model

1. Threat from new entrants (very low ) Retailing not allowed for foreign players In case of production of manmade fiber and their retailing, foreign players are yet still not allowed to retail their products in India because it is already over flown by the excessive of production and inefficient utilization of the whole manufactured goods and low cost labor. Huge investments in infrastructure is required For production of manmade fiber, there is need of huge amount of capable plant with loads of manufacturing machines and equipments so there is a huge amount of capital is required that cannot be afforded by everyone. Availability of skilled labors and technical know-how is low The skills and technicality needed by the new entrants is not so common and there are less expertise in this field so very few of the entrants who know all the technical know hows.

2. Availability of substitutes (high)

Unorganized retailing Due to unorganized sector of manmade fiber is there, lots of products is being sold at the background of the industry. That can become a threat to the industry.

 E-retailing As the electronic media is being at its apex, its use is also very intensified that can be seen by the deployment of this very thing in transactions of the manmade fiber products and goods

Catalogue sales Websites and e-shops are also within this run come as a substitute for the industry and cause losses to the industry as a whole.

3. Bargaining power of Customers (moderate )

Individually, customers have very little bargaining power Since the industry being large and huge for the customers because it has a high end customers, it not possible bargain much. The orders are most of the time are in bulk so there are very less chances to get discounted or reduced price Lots of various shopping formats available to shop from As mentioned above the various bargaining capabilities are not so successful but still there are lots of retailing options through which an unrequested price difference can be found to get a worthy price discount.

4. Bargaining power of suppliers (low)

Being bulk purchases done by organized retailers suppliers have very little bargaining power in organized retailing. Many retailers are doing backward integration and coming out with private labels, thus decreasing dependence on traditional suppliers

5. Competitive rivalry (moderate)

Very few national level players Growth rate Presence of regional and local players High competition between the national brands and retailers own

Strategic Intent
Purpose of the Strategic Plan
The mandate given to the Ministry of Textiles is to formulate and implement appropriate policies and programmes for the development of the textile industry, including production and promotion of export of textile and clothings, handlooms, handicrafts, wool and jute products. The main strategy adopted by the Ministry so far towards achieving the above objectives was to formulate and implement appropriate development schemes under the Annual Plan and Five Year Plan framework and also to formulate suitable policies for the growth and development of the textile sector. OUTCOME GOALS Build a strong and vibrant textile industry which is technologically advanced and internationally competitive. Incentivise investment in technological upgradation and modernisation through schemes such as TUFS with enhanced plan allocations.

Generate large scale employment and to improve the availability of skilled man-power for the entire gamut of the textile industry and to enhance the welfare of artisans, handloom weavers and textile workers.

ncourage vertical integration and value addition in the industry. for Welfare Schemes.

Enhance Indias share of global market for textiles. the export growth rate from the presentlevel of 6-10% to 15-20% in the next five years.

To make employment intensive subsectors such as handlooms, handicrafts, sericulture and wool more vibrant, rewarding for all the stakeholders, rich in quality and design and to preserve Indias rich cultural heritage in those activities.

Enhance the textile sectors contribution to Indias GDP, employment and foreign exchange earnings.

its share in GDP, contribution to employment and export earnings.

Bibliography
OTC, Compendium of Textile Statistics, Office of Textile Commissioner, Minsitry of Textiles, Government of India, Mumbai, 2011 FICCI, Trends Analysis of India & Chinas Textiles and Apparel Exports to USA Post MFA, FICCI, New Delhi, July, 2010 Chandra, P., Competitiveness of Indian Textiles & Garment Industry: Some Perspectives, a presentation, Indian Institute of Management, Ahmedabad, December 2004.

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