Until a few month back, mills across Gujarat and Tamil Nadu, the two prominent regions renowned for their spinning sectors, were witnessing healthy returns.
As the demand for apparel remained steady in the domestic and international markets, profits of spinning mills in these states also soared before the onset of the global slowdown.
Yarn weaving and spinning mills were flooded with orders round the year and small units were busy expanding their operational capacities to meet the increased demand. However, this does not seem to be the case any more.
Reeling under recessionary pressure
Saddled by the global economic deceleration, the SME spinning mills in the two states are finding it difficult to maintain their margins. Following a sharp fall in the domestic consumption rate and an equally drastic plunge in export volumes in the Textile Manufacturers sector, spinning mills have been pushed to the wall.
“Margins have narrowed considerably and sales have nosedived, posing a threat to the competitiveness and sustenance of small spinning mills. Due to the hostile market conditions, several units have closed down and more than 2,00,000 workers across South India have lost their jobs,” said A Dharwish, proprietor of Adams Hosieries Impex, a small-sized textile unit in Tirupur.
Besides South India, the spinning industry in Gujarat is also going through a lean phase as demand has spiralled down in the wake of recession. The weak market conditions have compelled several small spinning units in and around Gujarat to shut shop, thereby jeopardising the jobs of thousands of workers employed in these units. Despite the Gujarat government’s initiatives to revive the spinning industry in the state, small and mid-sized mills are struggling to stay afloat.
“Though the Gujarat government has announced fiscal benefits and provided assistance to workers in the spinning industry, the market situation is showing no signs of improvement. In addition, the trade environment has continued to remain grim,” said J Atal, proprietor of Raj Enterprises, a small textile mill in Surat.
To prevent the crisis from aggravating further, the spinning mills in India have been recommended to avail of the special benefits announced by the government like 4% subsidy offered under the Technology Upgradation Fund Scheme (TUFS) and other incentives for expanding their operations.
Moreover, the government’s provision of grants worth Rs 40 lakh for SMEs planning to set up spinning mills is also expected to bolster the sector and help it recover from the downturn.