High costs, stiff labour laws drive textile mills to B’desh

Jan 20 2013, 02:20 IST
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SummaryThe fabric comes from China, the technology comes from India, and the workers from Bangladesh.

The fabric comes from China, the technology comes from India, and the workers from Bangladesh. Stitched in Dhaka, the garment may be weaving an improbable victory for the concept of a united Asia, but it barely conceals growing frustrations of running a textile unit in India.

Hamstrung by liquidity crunch, soaring costs, frequent power outages (around eight-ten hours a day in parts of Tamil Nadu and Andhra Pradesh) and archaic labour laws, many domestic textile companies have gone abroad in recent years, mainly to Bangladesh, or are looking for acquisitions, say several textile industry executives. Worse, mills that have not yet set up base in Bangladesh are also opting for sourcing supplies from there, they add.

Arvind Mills is expanding its denim manufacturing capacity by around 27%, or 30 million metres, by setting up a plant in Bangladesh in a joint venture with Nitol group — expected to be completed in a year — with a projected investment of $60 million. The Aditya Birla Group inked a deal in July to buy assets of Ontario-based Terrace Bay Pulp Mill for roughly $110 million through a special purpose vehicle in which two group companies — Grasim Industries and Thailand-based Thai Rayon Public — would hold stake. Its move was aimed at achieving higher growth in the viscose staple fibre business, of which it’s a pioneer, through an integrated business model spanning the entire value chain, from plantation to pulp to fibre.

Surat-based polyester yarn maker Nakoda Limited has acquired manufacturing facilities at South Korean firm Kyunghan Industry Company and has announced an investment of $40 million. These apart, Chennai-based apparel manufacturer Rattha Overseas, Jay Jay Mills of Tirupur and Mumbai-based Creative Casuals, among others, have firmed up plans for sourcing from Bangladesh. Some mills are looking at acquisitions in Uzbekistan and Kazakhstan too.

The list is expected to grow once more mills manage to tide over the current liquidity crisis, stoked by a sudden slump in product prices in 2011 following two successive years of a steady rise in raw material costs. It’s because India allowed duty-free access to 48 textile and apparel products from Bangladesh last year.

“During the course of a recent meeting in Bangladesh, I realised there were more Indians in the meeting than natives of Bangladesh. I asked the owner of a big Indian firm, who was present in the meeting, and he said he was adding to staff there,” says

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