I extend a hearty welcome to all of you on behalf of the managing committee and myself to D.M.A.’s 2nd Annual General Meeting. I am happy to see the presence of our members here. It shows your keen interest and involvement in various programmes and activities of D.M.A. . I am grateful to every one of you for your valuable contribution towards its growth.
In April 2011, I took the charge as President of D.M.A. and I am hereby taking this opportunity to express my sincere thanks to all my friends and colleagues for their wholehearted support, cooperation and valuable guidance without which it would not have been possible for me to discharge my responsibilities to the satisfaction of the business community.
The Annual Report 2012-13 and Audited Accounts along with the Auditor’s Report for the year ended 31st March 2013 are with you. I do not want to take much of your time to repeat the same here. With your permission, I take them as read. However, I would like to touch upon certain important areas concerning the Indian denim sector.
Indian Denim Market – Present & Future :
The Indian Denim manufacturing and consumption is growing at a healthy CAGR of 12-15 percent over the last decade and is expected to grow at similar compounded rates over next few years. The denim capacity build up in Indian is often in “Steep – Steps” i.e. large capacities are added in a short period of time. The current installed capacity of denim fabric production stands at about 1 billion meters per annum. If the capacity continues to grow at even 10 percent in coming years, India will cross the magical mark of 1.2 billion meters by 2015.
Presently Indian denim industry is facing a situation of over capacity as there is demand and supply mismatch. There is also a temporary pressure on prices . The current domestic consumption of Indian denim is approx. 450 million meters and export of denim fabric from India is approx. 200 million meters which implies that capacity utilisation is approx. 65%-70% at present.
In real terms the per capita consumption of denim in India is only .32 pair of jeans compared to 2 pairs of jeans/person in US and Europe. However, because of the young demographic profile of the population wherein 50% of the population is in the age group of 15-35 years, our denim consumption will steadily increase.
The Indian denim manufacturers also see a good opportunity for growth in export markets. Potential in exports have increased due to slowdown in production both in US and Europe due to high costs. Similarly production in China has also slowed down due to increase in energy and labour costs. However, India will continue to face increased competition from countries like Pakistan and Bangladesh who enjoy advantage of low labour costs, depreciated currency and duty free access to consuming markets like Europe and Canada.
To allow the denim industry to grow at a rate of 10 percent, it is important that the Government should have a long term stable cotton fibre policy (which helps the mills to get cotton at globally competitive prices), allow working capital at reasonable rates and work with the industry to create a brand “India Denim” to increase exports.
Above all, if the Indian denim industry has to grow at a sustained level, it needs to constantly innovate and focus on research and development and also make efforts to see how it can be more and more environment friendly and reduce the consumption of water, steam and power.
As far as future of Indian denim industry is concerned in year 2013-14, consumer sentiment in U.S. is likely to improve which will help in creation of renewed demand. Also, Asian markets are expected to grow significantly. The Indian domestic markets should also grow 8-10% due to a higher G.D.P. growth and an increase in spending power in Tier-II & III cities. Overall this augurs well for the Textile Industry in India as a whole with several opportunities being created for fabric manufacturers. However, success will be driven by innovation, increasing the canvas of fabrics, increasing retail distribution and, efficient and low cost manufacturing.
COTTON OUTLOOK
As per the last C.A.B. estimates as on 17th April 2013, the revised state-wise Cotton Production for season 2012-13 is 340 lakh bales in comparison to cotton season 2011-12 for 355 lakh bales. C.A.B. after examining the data provided by various segments of the cotton economy as well as government’s own data, has come to the conclusion that the closing stock for cotton year 2012-13 as on 17th April 2013 would be around 37 lakh bales in comparison to cotton season 2011-12 for 29 lakh bales.
According to a latest report by U.S. Department of Agriculture, India’s cotton export are expected to exceed the earlier estimate to touch 9.2 million tonne in 2012-13 marketing year ending July, but they are likely to remain down by 34% from previous year level. The country has exported 14.7 million bales of cotton in the previous year 2011-12(marketing year).
The latest U.S. Department of Agriculture (USDA) projections for 2013/14 also indicate that globalcottonstocks are forecast to rise for the fourth consecutive season, reaching an all time high.
World ending stocks are now projected at 92.5 million bales for 2013/14, 9 percent (or nearly 7.6 million bales) above 2012/13. Globalcottonstocks have risen dramatically over the past several seasons as world production has outpaced consumption. Relatively highcottonprices in recent years encouraged production but discouragedcottonmill use at the same time.
The growth in global stocks since 2011/12 has occurred mainly in China, where national reserve purchases have effectively taken a large supply ofcottonout of the marketplace and supported prices.
At the end of 2012/13, stocks in China are estimated at 50 million bales, or about 59 percent of global stocks. For 2013/14, the latest projection indicates that stocks in China will likely expand, rising to nearly 59 million bales by season’s end, or 64 percent of the total.
It can therefore be concluded that whatever cotton stocks are being built up in the world, are actually being locked in Chinese warehouses, thereby creating tight supply position in rest of the world.
TECHNOLOGY UPGRADATION FUND:
a) Announcement of TUF Scheme for the 12th plan
Technology Upgradation Fund Scheme (TUFS) has been one of the most successful government schemes ever since it was launched in April 1999 and have so far attracted investment of around Rs.2.5 lakh crore. The scheme provides government assistance by way of interest reimbursement and& capital subsidy for investment on bench marked technology in the textiles; sector. The Scheme expired on march 2013. In the Budget Speech in February 2013, Finance Minister announced the continuation of TUFS during 12th Plan period - up to March 2017. However,the new scheme for operation during the period is yet to be announced.
After a few years of turbulence, the textiles industry of the country is now on a growth path and the situation is conducive for large investments on modernisation and expansion.
I understand that the Ministry of Textiles has already processed the new scheme and are awaiting the approval of the Cabinet. Announcement of the new TUFS needs to be expedited.
Skill requirements of Textile Industry
The country is currently grappling with serious challenges in finding the necessary skills, especially for the manufacturing industry, including a huge supply-demand gap both in terms of quality and quantity. Government is fully sensitised on this issue and has established a National Skill Development Corporation as a Public Private Partnership organisation to address skill requirements of various industries and the other sectors of the economy. As an equity holder of NSDC, CITI is working in close cooperation with the Corporation for addressing the skill requirements of the textile industry. The project envisages training of around 1.5 million workers for the textile industry in a period of ten years. The objective is to ensure adequate availability of trained workers for the mills as well as upgrading the skills of the existing labour force to retain the competitive edge in the fast changing environment of technology.
D.M.A. has also become a part of the initiative and is working closely with C.I.T.I. and I have also learned from Secretary General, C.I.T.I. that this proposal is still pending for its final approval from the Ministry.
Hank Yarn Obligation
In order to protect the highly labour intensive handloom sector, Government introduced Hank Yarn Packing Obligation in1974. Currently, all spinning mills are required to pack 40% of their total yarn production (excluding hosiery yarn and exports) on hanks. Due to liberalization of policies and growth of power loom sector, handlooms have become uneconomical and consequently a huge reduction in number of handlooms in operation in the country. At same time, the spinning capacity of the country increased substantially. However, there has not been any reduction in the Hank Yarn Obligation to take into reduction of handlooms and increase in total yarn production.
Surveys conducted by the government have established both reduction in hand looms in operation and extensive use of hank yarn by the power loom industry. To the extent of demand available, mills will pack yarn on hanks for commercial reasons. And packing more yarn on hanks than the handloom can consume time and cost only and will not help anybody. Therefore, the hank yarn obligation to be reduced from 40% at least to 25% and immediately phased out in stages.
D.M.A.’s Activities
Members, I would like to take this opportunity to inform you all that D.M.A. managing committee have met 2 times during last year and members have met 6 times during last year for discussing issues and prospects of denim industry.
In March 2013, a delegation consisting of 13 Members also went to Istanbul, Turkey for studying the value addition in washing & garmenting and processing which was very educative.
Apart from these meetings D.M.A. have sent 16 representations to Central Ministry i.e. Textiles, Commerce, Finance etc, highlighting issues concerning Denim Industry. D.M.A. delegations have also been continuously meeting the concerned officials in the ministry to give views on the industry.
ACKNOWLEDGEMENTS
Before I conclude, I would like to take this opportunity to place on record my sincere thanks on behalf of members of D.M.A. to Minister of Commerce Industry & Textiles, Textile Secretary, Commerce Secretary and Joint Secretaries of Commerce & Textiles dept. for their positive approach in resolving the concerns of the Denim Industry.
I would also like to thank CITI, Texprocil and AEPC for their continued support.
I would also like to convey my sincere thanks to members of managing committee of D.M.A. - Shri Y.C. Gupta, Shri S.K. Gupta, Shri Ashish Shah and Shri Aamir Akhtar for sharing my responsibilities and extending their effective help and support in discharging my duties as President, D.M.A.. I am equally grateful to all Members for their valuable guidance.
Finally, I would like to thank Assistant Manager & Company Secretary, Mr. Gagandeep Singh for carrying out his responsibilities with a sense of dedication and commitment.
Thank you.