CHAPTER IV PROBLEMS FACED BY TIRUPUR GARMENT INDUSTRY

CHAPTER IV PROBLEMS FACED BY TIRUPUR GARMENT INDUSTRY

CHAPTER IV PROBLEMS FACED BY TIRUPUR GARMENT INDUSTRY Tirupur is the seventh largest city in Tamil Nadu and is one of the fastest developing cities in the state. Popularly referred to as "Dollar City" or "Small Japan" or Banian City". Tirupur has carved a niche in the textile and knitted readymade garments industry. The main problems faced by the readymade garment industry in India and Tirupur are explained below. 4.1 LOW LABOUR PRODUCTIVITY AND INDIAN LABOUR LAWS Lack of discipline amongst labour employed in the Indian readymade garment units is a major reason for very low productivity and high cost of Indian garments. Inflexible labour laws and strong job security are harming the performance of its workforce. As a result, apparel manufacturers in India have been urging the government to relax the laws. India's labour laws date back to the time when socialism was introduced for eradicating India's poverty. But now in global scenario, productivity linked wage system and some amount of flexibility in laws would give tremendous boost to Indian readymade garment industry. 4.2 RUPEE APPRECIATION AND ARTIFICIAL PRICING OF CHINESE CURRENCY India's exports have been hit by the appreciating strength of the Indian rupee against the US dollar. Indian garment export declined to US $ 1.069 billion between April and October 2003. Correspondingly, India's export to the European union also increased by 20 per cent during the same period, thanks largely to the strong euro which scoresd well against the dollar. Further, artificial pricing of Chinese currency is giving undue advantage to Chinese industry in global market. 158

4.3 INADEQUATE INFRASTRUCTURE Most of the Indian garment exports are fashion garments, which have limited life. Overall infrastructure, both at port and on land, is not yet developed to cater the huge quantity of export. The port infrastructure is at present highly insufficient. Also shipping a container of garments form India to the US is costlier in India compared to other Asian countries. Non-availability of direct sailing vessels also increases the transit time. Further, delays and inefficiencies in Indian ports compared to other Asian countries add more difficulties to Indian exporters. Though the export through aircraft is quite expensive, it saves a lot of time. 4.4 EXISTENCE OF LONG AND COMPLEX SUPPLY CHAINS CAUSING LENGTHENING OF LEAD TIME The supply chain of India is highly fragmented and lacks coordination between industry and trade bodies. Existence of large number of intermediaries also adds to the cost and lengthens the lead times. 4.5 RAW MATERIAL AVAILABILITY The availability of Raw material is a vital thing for any industry. Uncertainty is prevailing in India with respect to a few raw materials, namely, cotton and yarn, etc., the undue and frequent price fluctuations, the mismatch between supply and demand, lack of proper forecasting of political decisions and other commitments. These problems posed major challenges to the readymade garment industry in Tirupur. 4.6 FUEL Compared to other countries, the higher fuel cost in India mainly at Tirupur is a major draw back. The duties and taxes on petroleum products are also higher in India. This leads to increase in the cost of production. 159

4.7 PRICING Compared to other countries the production costs are much higher in Tirupur, and the Tirupur exporters find it difficult to compete with other countries. For example, in Bangladesh they are able to quote prices that are lower by 17 per cent, thus securing very good export orders. In Tirupur, the knitting, processing and finishing units are scattered all over towns, whereas in other countries they are run under one-roof. 4.8 PROCESSING UNITS Processing units are located at different places; lately the discharge of effluents has become another problem. The government is well aware of the situation that existed for over four decades, and all of a sudden, industrial units were put under pressure. Even small units are also asked to have effluent treatment plants. 4.9 LABOUR Unlike other countries labour has become a very sensitive area to handle in Tirupur. Skilled labour is the basic requirement. Some big industries spend huge time and money on training, but unfortunately there is no assurance or binding on the part of trained labour to continue to work in one place. 4.10 TAXATION AND OTHER LAWS The bureaucrats in India, particularly the customs and excise, income tax, foreign trade, etc., are not happy with any business community, particularly exporters. The rules, regulations, and policies of one ministry are contradictory to those of another. Different interpretations are made and objections are raised. Show cause notices are Issued by the officials, and the entrepreneurs are put to a lot of difficulties. 160

The major problems faced by the sample units in the study area are explained in the following tables. 4.11 NON-AVAILABILITY OF RAW MATERIAL IN TIME The opinion of the respondents, who are suffered from the problem nonavailability of raw material in time in the study area, is explained in table 4.1 TABLE 4.1 NON-AVAILABILITY OF RAW MATERIAL IN TIME Opinion Manufacturer Exporter Merchant Exporter Total No. of % No. of % No. of Very high 03 06.00 02 06.67 05 6.25 High 16 32.00 12 40.00 28 35.00 Moderate 18 36.00 05 16.67 23 28.75 Insignificant 13 26.00 11 36.67 24 30.00 Table 4.1 shows the opinion of the respondents about the problem of nonavailability of raw material in time. Out of 80, 41 per cent of sample units suffered heavily from the problem of non-availability of raw material in time. About 28 per cent of the sample units were moderately affected and 30 per cent of the respondents were not affected by the problem. It can be concluded that the majority of the sample units were affected by the problems of non-availability of raw material in time in the study area. %

4.12 NON-AVAILABILITY OF SKILLED LABOUR The number of sample units, which suffered from the problem of nonavailability of skilled labour in the study area, is given in table 4.2 TABLE 4.2 NON-AVAILABILITY OF SKILLED LABOUR Manufacturer Merchant Total Exporter No. of % No. of % No. of % Very high 11 22.00 05 16.67 16 20.00 High 14 28.00 07 23.33 21 26.25 Moderate 18 36.00 15 50.00 33 41.25 Insignificant 07 14.00 03 10.00 10 12.50 Table 4.2 indicates the problem of non-availability of skilled labour. Out of 50 manufacturer exporters 36 per cent opined that they were moderately suffered from the problem, 28 per cent suffered heavily and 22 per cent of the manufacturer exporters stated that the non-availability of skilled labour was their major problem. Regarding merchant exporters 50 per cent of the them moderately suffered from the problem and 40 per cent of the them were highly affected, of which 16 per cent were very much affected by the problem of non - availability of skilled labour. It is inferred from the table that most of the sample units are affected by the problem of non-availability of skilled labour. This is due to high number of labour turnover in the sample units in the study area. 162

4.13 EXCHANGE RATE FLUCTUATION AFFECTS THE PROFIT The opinion about the foreign currency exchange rate which affects the profitability of the study units is analyzed in table 4.3 TABLE 4.3 EXCHANGE RATE FLUCTUATION AFFECTS THE PROFIT Manufacturer Merchant Total Exporter No. of % No. of % No. of % Very high 21 42.00 14 46.67 35 43.75 High 13 26.00 09 30.00 22 27.50 Moderate 10 20.00 05 16.67 15 18.75 Insignificant 06 12.00 02 06.67 08 10.00 As per table 4.3, 42 per cent of the manufacturer exporters and 46 per cent of the merchant exporters opined that the foreign currency exchange rate fluctuation very much affected the profitability of the business. About 26 per cent and 30 per cent of the manufacturer exporters and merchant exporters were highly affected by the fluctuation rate. Nearly 20 per cent and 16 per cent of the manufacturer exporters and merchant exporters were moderately affected by the problem. The foreign currency fluctuation rate was not a major problem for the 12 per cent and 6 per cent of the manufacturer exporters and merchant exporters respectively. It can be concluded from the table that the foreign exchange fluctuation rate affects the profitability of the readymade garment industry in the study area. 163

4.14 NON-AVAILABILITY OF INFRASTRUCTURE FACILITY The opinion of the exporters about the availability of basic infrastructure facilities in the study area is explained in table 4.4 TABLE 4.4 NON-AVAILABILITY OF INFRASTRUCTURE FACILITY Manufacturer Merchant Total Exporter No. of % No. of % No. of % Very high 11 22.00 07 23.33 18 22.50 High 17 34.00 12 40.00 29 36.25 Moderate 13 26.00 05 16.67 18 22.50 Insignificant 09 18.00 06 20.00 15 18.75 Table 4.4 shows the opinion of the exporters about the non-availability of basic infrastructure facilities in the study area. 22 per cent of the manufacturer exporters and 23 per cent of the merchant exporters were very much dissatisfied with the availability of infrastructure facilities. Similarly, 34 per cent and 40 per cent of the manufacturer exporters and merchant exporters were highly dissatisfied with the availability of the infrastructure facilities and stated that it is a major problem in the study area. 26 per cent and 16 per cent of the manufacturer exporters and merchant exporters were moderately affected by the problem. The problem is insignificant for 18 per cent and 20 per cent of the manufacturer exporters and merchant exporters. 164

4.15 PRICE FLUCTUATION The opinion of the exporters about the problems of the price fluctuation of readymade garments is explained in table 4.5 TABLE 4.5 PRICE FLUCTUATION Manufacturer Mercliant Exporter Total No. of % No. of % No. of % Very high 13 26.00 04 13.33 17 21.25 High 27 54.00 15 50.00 42 52.50 Moderate 07 14.00 06 20.00 13 16.25 Insignificant 03 06.00 05 16.67 08 10.00 Opinion about price fluctuation of readymade garment exporters revealed the fact that a majority of the manufacturer exporter and merchant exporter units suffered from price fluctuation. About 14 per cent of the manufacturer exporters and 20 per cent of the merchant exporter units were moderately affected by the price fluctuation. A few sample units stated that they did not suffer from price fluctuation of readymade garments. 165

4.16 DELAYED DELIVERIES The number of exporters who suffered from the problem of delayed deliveries to importers is given in table 4.6. TABLE 4.6 DELAYED DELIVERIES Manufacturer Merchant Exporter Total No. of % No. of % No. of % Very high 11 22.00 03 10.00 14 17.50 High 14 28.00 06 20.00 20 25.00 Moderate 23 46.00 16 53.33 39 48.75 Insignificant 02 04.00 05 16.67 07 08.75 Delayed delivery is one of the reasons for discouraging the trends in export. It affects the export to a very great extent. Nearly 46 per cent of the manufacturer exporter and merchant exporter units' were moderately affected by the problems of delayed deliveries. 50 per cent of the manufacturer exporter and 30 per cent of the merchant exporter units highly suffered from the delayed deliveries of readymade garments of which 22 and 10 per cent of manufacturer exporters and merchant exporters were very much affected by the problem. It is inferred from the table that the manufacturer exporters were highly affected by the problem of delayed delivery than that of merchant exporters in the study area. The reasons stated by them for the delayed delivery of goods were non-availability of skilled labour, nonavailability of raw materials in time and insufficient funds for producing the readymade garments. 166

4.17 INSUFFICIENT BANKING FACILITIES The opinion of the exporters about the problems of insufficient banking facilities in the study area is explained in table 4.7 TABLE 4.7 INSUFFICIENT BANKING FACILITIES Manufacturer Merchant Exporter Total No. of % No. of % No. of % Very high 18 36.00 04 13.33 22 27.50 High 23 46.00 15 50.00 38 47.50 Moderate 09 18.00 11 36.67 20 25.00 The above table explains how insufficient banking facilities affect the progress of this industry. Opinions expressed by the exporters showed that more than 75 per cent of the sample units complained about the insufficient banking facilities, of which about one fourth of the sample units felt it acutely. About 18 per cent of manufacturer exporters and 20 per cent of the merchant exporters moderately suffered from the problem. It can be inferred from the table that all the sample units were affected by the problem of insufficient banking facilities with varying degree. 167

4.18 DELAYED PAYMENT BY IMPORTERS The number of sample units, which suffered from the problem of delayed payment by the importers, is given in table 4.8. TABLE 4.8 DELAYED PAYMENT BY IMPORTERS Manufacturer Merchant Exporter Total No. of % No. of % No. of % Very high 04 08.00 08 26.67 12 15.00 High 16 32.00 13 43.33 29 36.25 Moderate 28 56.00 06 20.00 34 42.50 Insignificant 02 04.00 03 10.00 05 06.25 As per table 4.8, more than 90 per cent of the sample units reported that the delayed payments by the importers affected their export trade. Opinion got from exporters explained that delayed payments was very high in 8 per cent, high in 32 per cent, and moderate in 56 per cent of the manufacturer exporters. In the same manner, it was very high in 26 per cent, high in 43 per cent, moderate in 20 per cent and insignificant in 10 per cent of the merchant exporters. 168

4.19 QUALITY REJECTIONS BY IMPORTERS The opinion of the exporters about the quality rejection by the importers is given in table 4.9. TABLE 4.9 QUALITY REJECTIONS BY IMPORTERS Manufacturer Merchant Total Exporter No. of % No. of % No. of % Very high 03 06.00 02 6.67 05 06.25 High 12 24.00 09 30.00 21 26.25 Moderate 29 58.00 11 36.67 40 50.00 Insignificant 06 12.00 08 26.67 14 17.50 Very often readymade garments exported to foreign countries are subjected to quality rejections owing to several reasons. Opinions got from sample units revealed that 58 per cent of the manufacturer exporters suffered from moderate quality rejections and it was very high in 6 per cent, high in 24 per cent and insignificant in 12 of the manufacturer exporters. Merchant exporters thought that the quality rejections were very high in 6 per cent, high in 30 per cent, moderate in 36 per cent and insignificant in 26 per cent. To sum up more than 75 per cent of the exporters were affected by the quality rejections by the importers in the study area. 169

4.20 TECHNICAL INCOMPETENCE The opinion about technical incompetence of the exporters in the study is explained in table 4.10. TABLE 4.10 TECHNICAL INCOMPETENCE Manufacturer Merchant Total Exporter No. of % No. of % No. of % Very high 11 22.00 03 10.00 14 17.50 High 13 26.00 15 50.00 28 35.00 Moderate 17 34.00 07 23.33 24 30.00 Insignificant 09 18.00 05 16.67 14 17.50 Technical incompetence existed in readymade garments exporting industry to a certain extent and it had an adverse effect on the total export. Opinion got from the manufacturer exporters revealed that it was very high in 22 per cent, high in 26 per cent, moderate in 34 per cent and insignificant in 18 per cent. Regarding merchant exporters, 14 per cent felt that it was very high, 50 per cent high, 23 per cent moderate and 16 per cent insignificant. It is inferred from the table that more than 80 per cent of the exporters suffered from the technical incompetence in the study area. 170

4.21 GOVERNMENT POLICIES AND REGULATIONS ARE ENCOURAGING The opinion of the exporters about the Government policies and regulations relating to readymade garment industry is analyzed in table 4.11. TABLE 4.11 GOVERNMENT POLICIES AND REGULATIONS ARE ENCOURAGING Manufacturer Merchant Exporter Total No. of % No. of % No. of % Yes 28 56.00 18 60.00 46 57.50 No 22 44.00 12 40.00 35 42.50 It is the government's export policies that determine the quantum of export, when readymade garment industry was contacted by the researcher in the study area, 56 per cent of the manufacturer exporters felt that the government's policies were encouraging. The other 44 per cent of the manufacturer exporters felt that it was not encouraging. 60 per cent of merchant exporters felt that the government's export policies were helping them, 40 per cent considered it the other way. It can be concluded from the table that about 42 per cent of the exporters disclosed the fact that the Government's policies for promotion of export marketing were not encouraging. 171

4.22 EFFECT OF POLITICAL INSTABILITY ON EXPORT The opinion of the exporters about the effect of political instability on export of readymade garment in the study area is explained in table 4.12 TABLE 4.12 EFFECT OF POLITICAL INSTABILITY ON EXPORT Manufacturer Merchant Total Exporter No. of % No. of % No. of % Export affected 38 76.00 22 73.33 60 75.00 Export not affected 12 24.00 08 26.67 20 25.00 The above table shows how political instability is one of the factors that affect the export trade. About 75 per cent of the manufacturer exporters and merchant exporters informed that the political instability affected their export performance and 24 per cent of them thought that it did not affect them. In case of manufacturer exporters 76 per cent opined that the political instability definitely affected their export performance and 24 per cent stated that there is no positive correlation between political instability and export performance. Among the merchant exporters, 73 per cent agreed that the political instability affects their export performance and 26 per cent did not agree with it. 172

4.23 POLLUTION CONTROL MEASURES INFLUENCES INDIA'S FOREIGN TRADE The opinion of the exporters in the study area about the pollution control measures that influenced India's foreign trade is explained in table 4.13 TABLE 4,13 POLLUTION CONTROL MEASURES INFLUENCES FOREIGN TRADE Manufacturer Merchant Exporter Total No. of % No. of % No. of % Yes 31 62.00 23 76.67 54 67.50 No 19 38.00 07 23.33 26 32.50 As far as readymade garment industry is concerned pollution is a nagging problem. Pollution control measures implemented by pollution control board periodically disturbed the export market in India. 62 per cent of the manufacturer exporters felt that pollution control measures certainly boosted their exports and only 38 per cent felt the other way. In case of merchant exporters 76 per cent felt that it influenced their export and 23 per cent thought that it did not influence their export trade. It is inferred from the table that the majority of exporters are of the opinion that the pollution control measure taken by the government influences their export trade. 173

4.24 EFFLUENT TREATMENT AND THE COST OF PRODUCTION The opinion of the exporters about the effluent treatment expenditure increases the cost of production considerably in the study area is explained in table 4.14. TABLE 4.14 EFFLUENT TREATMENT AND THE COST OF PRODUCTION Manufacturer Merchant Exporter Total No. of % No. of % No. of % Yes 43 86.00 26 86.67 69 86.25 No 07 14.00 04 13.33 11 13.75 The above table explains how the cost of production increased due to the costly effluent treatment. 86 per cent of the manufacturer exporters felt that the effluent treatment done according to government stipulations increased the cost of production and 14 manufacturer exporters thought that it did not increase the cost. About 86 per cent of the merchant exporters thought that the effluent treatment certainly increased the cost of production and 13 per cent differed from it. It is inferred from the table, most of the manufacturer exporters and merchant exporters opined that the effluent treatment increased the cost of production of the readymade garments. 174

4.25 EFFECT OF POWER CUT ON EXPORT TRADE The opinion of the exporters about frequent power cut which forced them to change the production schedule and to matce changes in the consignment of export in the study area is explained in table 4.15 TABLE 4.15 EFFECT OF POWER CUT ON EXPORT TRADE Manufacturer Merchant Exporter Total No. of % No. of % No. of % Affected 50 100.00 30 100.00 80.00 100.00 Not affected 0 0 0 0 0 0 Source; Primary data Frequent power cuts affected this growing foreign trade to a great extent. All the manufacturer exporters and merchant exporters felt that power cut was the major problem and it affected their export trade seriously. Exporters eagerly expected some kind of permanent solution to this problem because frequent power cut forced to change the production schedule which in turn leads to delay in export of consignment. 175

4.26 MAJOR MARKETING PROBLEMS OF MANUFACTURER EXPORTERS The major marketing problems faced by the manufacturer exporters are explained in table 4.16. TABLE 4.16 MAJOR MARKETING PROBLEMS OF MANUFACTURER EXPORTERS Problems Non-availability of raw material in time Non-availability of skilled labour Exchange rate fluctuation Non-availability of infrastructure facility Total points 15 10 5 0 Very High Moderate Insignificant No. of high units 295 03 16 18 13 50 395 11 14 18 07 50 495 21 13 10 06 50 400 11 17 13 09 50 Price fluctuation 500 13 27 07 03 50 Delayed deliveries 420 11 14 23 02 50 Insufficient banking facilities Delayed payment by importers Quality rejections by importers Technical incompetence Total 4100 545 18 23 09 0 50 360 04 16 28 02 50 310 03 12 29 06 50 380 11 13 17 09 50 Information collected from the exporters relating to their major marketing problems have been analyzed and graded by the researcher into four categories. They are very high, high, moderate and insignificant. For the purpose of analysis very high has been awarded 15 points, high 10 points, moderate 05 points and insignificant 0 points. In order to find out the major problems faced by the manufacturer exporters, rating of the various problems is given in table 4.17 176

4.27 RATING OF MARKETING PROBLEMS OF MANUFACTURER EXPORTERS The major marketing problems of the manufacturer exporters in the study area are given in table 4.17. TABLE 4.17 RATING OF MARKETING PROBLEMS OF MANUFACTURER EXPORTERS Marketing problems Total points Secured Rank Non-availability of raw material in time 295 10 Non-availability of skilled labour 395 6 Exchange rate fluctuation 495 3 Non-availability of infrastructure facility 400 5 Price fluctuation 500 2 Delayed deliveries 420 4 Insufficient banking facilities 545 1 Delayed payment by importers 360 8 Quality rejections by importers 310 9 Technical incompetence 380 7 Table 4.17 shows the total points secured by the manufacturer exporters for the major marketing problems. The most important problem is the insufficient banking facilities. It has secured the first rank (545 points). The second important problem is price fluctuation (500 points). The third important one is foreign currency exchange rate fluctuations (495 points). Delayed deliveries secured the fourth position. Non-availability of infrastructure got the fifth rank. The sixth one is non-availability of skilled labour. Seventh rank goes to technical incompetence of the exporters. Delayed payment by importers, quality rejection by importers and non-availability of raw material in time is considered as least important problems. 177

4.28 MAJOR MARKETING PROBLEMS OF MERCHANT EXPORTERS The major marketing problems of merchant exporters in the study area are explained in table 4.18 TABLE 4.18 MAJOR MARKETING PROBLEMS OF MERCHANT EXPORTERS Problems Non-availability of raw material in time Non-availability of skilled labour Exchange rate fluctuation Non-availability of infrastructure facility Total points 15 10 5 0 Very High Moderate Insignificant No. of high units 175 02 12 05 11 30 220 05 07 15 03 30 325 14 09 05 02 30 250 07 12 05 06 30 Price fluctuation 240 04 15 06 05 30 Delayed deliveries 185 03 06 16 05 30 Insufficient banking facilities Delayed payment by importers Quality rejections by importers Technical incompetence Total 2345 265 04 15 11 0 30 280 08 13 06 03 30 175 02 09 11 08 30 230 03 15 07 05 30 Information collected from the exporters relating to their major marketing problems have been analyzed and graded by the researcher into four categories. They are very high, high, moderate and insignificant. For the purpose of analysis very high has been awarded 15 points, high 10 points, moderate 05 points and insignificant 0 points. In order to find out the major problems faced by the merchant exporters, rating of the various problems is given in table 4.19. 178

4.29 RATING OF MARKETING PROBLEMS OF MERCHANT EXPORTERS The major marketing problems of the merchant exporters in the study area are given in table 4.19. TABLE 4.19 RATING OF MARKETING PROBLEMS OF MERCHANT EXPORTERS Marketing problems Total points Secured Rank Non-availability of raw material in time 175 9 Non-availability of skilled labour 220 7 Exchange rate fluctuation 325 1 Non-availability of infrastructure facility 250 4 Price fluctuation 240 5 Delayed deliveries 185 8 Insufficient banking facilities 265 3 Delayed payment by importers 280 2 Quality rejections by importers 175 9 Technical incompetence 230 6 Table 4.16 shows the total points secured by the merchant exporters for the major marketing problems. The most important problem is Exchange rate fluctuation. It has secured the first rank (325 points). The second important problem is Delayed payment by importers (280 points). The third important one is Insufficient-banking facilities (265 points). Non-availability of infrastructure facility secured the fourth position. Price fluctuation got the fifth rank. The sixth one is Technical incompetence of the exporters. Seventh rank goes to Nonavailability of skilled labour. Delayed deliveries, Non-availability of raw material in time and Quality rejections by importers are considered as least important problems. 179