Capacity utilisation has dropped to 60%-65%, say sources
Even as denim fabric production is increasing in the country, a decline in capacity utilisation is said to be hurting the industry.
The installed denim fabric production has increased to 1,500 million metres, from 800 million metres in 2012 and another 150 million metres of capacity is in the pipeline, according to the Denim Manufacturers’ Association. The annual domestic demand is roughly 800 million metres and exports are about 200 million metres.
Price correction
Sources said that the industry had seen a price correction of 20% in the last two years. Further, capacity utilisation had dropped to 60%-65%. Some of the new companies are facing financial problems and risk turning into non-performing assets.
The government should also give a fillip to exports. Though denim fabric production is by large-scale, organised industries, denim garments are made mostly by small-scale units. With relaxation in labour laws and industry-friendly policies, more organised industries would be getting into garment production in the next five years, the sources added. In exports, China, Bangladesh and Pakistan are the countries that Indian manufacturers would have to compete with for both denim fabric and garments.
Though garment production is more viable in Bangladesh, there is scope to improve denim fabric exports.
Post GST, the denim industry has temporarily closed down 30% to 40% capacity and if the present situation continues, there could be more production cuts, said Sharad Jaipuria, chairman of the association.
Source: http://www.thehindu.com/business/Industry/overcapacity-hurting-denim-fabric-industry-say-experts/article21823179.ece