The Indian textile industry, the single largest employment provider, employing over 91 million people particularly the rural masses and women and the backbone of country's economy has been passing through a worst crisis in its history during last two years owing to high volatility in the raw material prices.
Tamil Nadu is the worst affected State which accounts for over one third of the textile business in the country, directly employing over 50 lakh people, fetching over Rs.50, 000 crores forex earnings and accounting for 47.5% of the yarn production capacity of the country due to added problems like acute power shortage for past four years and high transportation cost.
The State has to procure over 95% of its raw material particularly cotton from States like Gujarat and Maharashtra by spending around Rs.5 per kg as the lorry freight and again spend the same amount to sell its produce in the upcountry particularly the power loom centres in Maharashtra. Andhra Pradesh has also joined the wagon for the past one and half years due to severe power shortage.
The Southern grid corridor bottleneck does not allow the Southern States to mitigate the power crisis taking advantage of the open access power purchase system. Realizing the grave situation of the textile industry, the Centre announced a financial restructuring package of Rs.35,000 crores on 29th May 2012 to avoid further sickness in the textile industry.
Mr S Dinakaran, Chairman, The Southern India Mills Association, the largest employers' organization representing the textile industry in the country has stated that the diesel price hike of Rs.9.25 per litre for bulk purchase at one stroke for the industry has come as a rude shock to the textile industry.
Though the price is increased by Rs.9.25 per litre, the net impact of the increase at the consuming point would work out to Rs.11.00 per litre. He has stated that Tamil Nadu textile industry is facing over 60 percent power shortage. He has added that the State has a generation capacity of only around 7,000 MW as against the peak demand of over 12,500 MW and is relying only on diesel power generation to sustain the survival of the industry in the State.
He has said that the investment in the textile industry has become dormant during the last three years and over 20 lakh people employed in the textile industry already lost their jobs owing to power shortage.
Mr Dinakaran has stated that the diesel price hike of Rs.11.00 litre including all levies for bulk purchase would have an implication of Rs.4/- per kg in the cost of production of 40s count yarn for the spinning sector with diesel power generation apart from substantial increase in the indirect costs like transportation and the costs of all inputs and these cost escalation would have severe cascading effect down the value chain in the textile industry.
He has stated that power generated out of diesel is already expensive by over 100% when compared to the grid power and the textile industry which is facing 12 to 14 hours load shedding per day, 40% power cut and four hours peak hour restrictions would come to a grinding halt with the diesel price hike. He has pointed out that over six million handloom and power loom weavers in the country are suffering due to the abnormal increase in the costs of inputs during the last three years and the diesel price hike would lead to total industrial unrest in these segments.
SIMA Chairman has stated that India is already in a disadvantage position in the international textile market due to high cost of inputs which is to the tune of 20% when compared to countries like Bangladesh as per a study conducted by the industry associations. He has pointed out that the textile industry which has earned over $ 37 Bn during the year 2011-12, the single largest foreign exchange earner of the country would further lose its competitive edge in the global market due to the diesel price hike which is one of the major inputs for the textile production in terms of energy and transport.
SIMA Chief has informed that the industry has been pleading for the past several years exempting all the fuels meant for captive power generation from all fiscal levies till the country becomes self sufficient on power front. He has stated that such exemption is essential to sustain the global competitiveness and ensure achieving inclusive growth and the centre has failed to consider the genuine demand resulting in job losses for several millions.
When the Government of Tamil Nadu is actively considering for VAT exemption for high speed diesel oil meant for captive power generation, the abnormal hike in diesel prices would sound death knell for the textile industry.
Mr Dinakaran has appealed to the Hon'ble Prime Minister to immediately rollback the price hike in the interests of over 91 million people jobs in the textile industry. He has also appealed to the Hon'ble Chief Ministers of Southern States particularly Tamil Nadu and Andhra Pradesh which are starving for power to put pressure on the centre to withdraw the diesel price hike and also to exempt the diesel oil from VAT to avoid mass closures of industrial units resulting in severe industrial and social unrest.
