The Hindu Business Line : Fraying at the seams

Anand Raj is in his early 20s and as a tailor employed in a garment factory in Tamil Nadu's knitwear export belt of Tirupur, about 60 km from Coimbatore, takes home a salary of Rs 3,000. This is no grand sum, but for a Std VII pass from a Thanjavur village school whose father is a daily wage earner, he is happy to at least retain his job of eight years.

Many of his colleagues have already lost their jobs thanks to global recession pushing down Tirupur's exports by nearly 20-30 per cent. His employer, P. Vidhyaprakash, Director of Styleman Textiles, fears bleak times ahead, and has laid off about 200 workers in the last few months. "Things are bad; only this morning an American customer sought a two-month delay for the shipment of a Rs 40-lakh order. Already in November-December our exports were down by 25 per cent. I'm sure worse is yet to come as some customers are saying this is just the beginning. During the Christmas season, they found only 30 per cent customers visiting malls, and an unprecedented 30- 70 per cent sales were offered during the season."

Styleman makes half-a-million pieces of Hanes annually - both T-shirts and innerwear - and exports to six countries including the US, Canada and Europe. Its workforce, two thirds female, has come down from 700 to 500; "we are operating at 70 per cent capacity and indications are of more layoffs."

This is not good news for Anandraj and his colleagues, already resentful about their plight in an India that was in the highgrowth lane till the recent downturn. "When we see other youngsters having a good time we are hurt, but what to do? God has made us like that - with little means and no education.

So we have to be content with what we have. But it is not as though we don't yearn for a better life," he muses. He can afford to go to a movie once in two months; "we either watch TV or chat with friends." Eating out is not an option. He is single, and "anyway, who is going to give me his daughter in marriage? In these bad times textile employees are doomed in the marriage market," he grins.

And not without reason. During boom times, Tirupur had attracted people from surrounding villages. "But many of the workers who have lost their jobs have quietly gone back to their villages, either to work as agricultural labourers or to do coolly work wherever they can find it," says Muthukumaraswamy, a local Union leader. He surmises that over 15,000 people have already lost their jobs and returned to their villages.

He adds that the crowd in the train used by workers to commute to Tirupur each morning from Palakkad and Coimbatore has thinned considerably.

UNUSUAL TIMES

Unusual problems require unusual solutions, and hence you have a Union leader joining textile companies to urge immediate Government assistance. "When a capitalist country like America can give huge packages to help their industries, why can't we do so?

After all, the livelihoods of poor people are at stake," he says. If we do not have law and order problem yet due to loss of jobs and acute distress, it is because all the members in such families work, so somehow they manage a meal or two a day. "Or else you would have riots."Vidhyaprakash adds that most of the workers come here from southern districts of Tamil Nadu; "twenty per cent didn't come back after Diwali and 15 per cent after Pongal, as there are no jobs in Tirupur."

As you drive along the streets and by shops offering huge discounts, you notice a plethora of "financiers" dotting the landscape, and shudder to think of the interest they charge on unsecured loans.

Do they have access to bank credit, one asked Mohankumar, a worker, hoping against hope. "Of course not; banks want documents, which we don't have", he says.

"When there is an emergency we borrow from moneylenders."

The interest is a staggering Rs 10 per week on Rs 1,000. Work out the math and it makes your head spin. Does he have hope about his future, one asks Anandraj. "Of course, otherwise you cannot live," he says, even as his mobile beeps. "Oh, we all have mobiles, because of lifetime incoming free! We keep the phone for emergency use only."

Vidhyaprakash says the industry is reeling under inadequate finance as "bankers consider textile sector as dangerous. If the Government does not take corrective measures immediately we may have to shut shop." He wants banks to give an additional 25 per cent loan over the limit; an increase in duty drawback and reduction in packing credit interest rate for exports to 5 per cent. If these steps are taken immediately we can save some jobs."

REDUCED WORK

A. Sakthivel, Chairman, Federation of Indian Export Organisations (FIEO) - Southern Region, estimates that the 5,000-odd textile units in Tirupur provide direct and indirect employment to about 5 lakh workers. "Over 10,000 people have already lost jobs; we are trying to reduce layoffs by giving at least 3-4 days' work to employees, but business is already down by 15-20 per cent; and if things don't improve and the Government doesn't act in time, more jobs will be lost. Things are so bad that in the entire Indian export sector, up to one crore jobs can be lost."

Styleman's Vidhyaprakash, a medium player in this sector, says customers are now asking for 30 to 60 or 90 days credit and asks: "What choice do we have?"

Add to this the power shortage in Tamil Nadu and the already tottering textile industry's woes multiply. "Use of diesel pushes up the cost of production by Rs 4-5 per garment."

He is mulling about increasing his share in the domestic market which is already 20 per cent.

While the entire picture will be clear only by March-end, he expects his annual turnover to go down from Rs 35 crore to Rs 30 crore this year. Exploring new markets such as West Asia is not an option as China is a strong player in knit garments there, even though "we are stronger on quality, flexibility and delivery schedules."

K.V. Srinivasan, Chairman, Southern India Millis' Association (SIMA), says the industry has been facing tough times for nearly a year.

"It started with the rupee appreciation and then sudden depreciation (hitting forward contracts) and then came the power shortage in Tamil Nadu. In the last six months we've been hit by Government policy on minimum support price of cotton.

While cotton prices are being kept high, global recession has pushed down demand.

Even in countries where textile activity is possible, money to finance it is not available!

So we have been hit from all sides. Members tell us that during January there has been nil shipment."

He says a third of textile production goes into direct and indirect exports, and the textile industry is the worst hit in the export sector because in the last three months in particular the drop in demand is 50-70 per cent, with no signs of improvement. "To make matters worse, our distributors overseas have problems with finance and credit insurance. Either the insurance company or the bank is in trouble. And because of their problems they are not willing to lend to textile companies, which they find `high risk' clients."

He estimates that even the domestic market has shrunk by about 10 per cent; and with the export market falling by 50 per cent "all the yarn coming out from our mills is chasing too few customers."

`LAYOFF' DEFINITION!

So what has been the resultant layoff? Srinivasan says that overall the industry has had to resort to layoffs. "But then what do you mean by `layoff'? You still have to pay your in-house workers." He is the Managing Director of Premier Mills, which provides residential accommodation to rural female workers. "We took them in, so as a policy we have not sent them back, but we don't replace those who leave."

Adds K. Selvaraju, SIMA Secretary General: "The smaller units have sent home 25-30 per cent workers. And the 50-60 per cent power shortage in Tamil Nadu makes matters worse." On closure of mills, he says that while this has not yet happened, capacity is being reduced. "And nobody wants to announce they are closing down!"

Srinivasan adds that the textile industry gives direct employment to about 3.5 crore people and indirect employment to another 5 crore, and its exports amount to $22 billion. An industry that is so labour intensive needs urgent attention from the Government.

Apart from the demands already listed, SIMA has sought a two-year moratorium on repayment of loans. FIEO's Sakthivel wants an income tax holiday and exemption from FBT and service tax. Vidhyaprakash is blunter.

"If all this is not done, we'll shut shop and hand over the keys to the bankers."

Response may be sent to rasheeda@thehindu.co.in

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