I extend a hearty welcome to all of you on behalf of the managing committee and myself to D.M.A.’s 3rd 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.
“Friends it is indeed a great privilege for me to welcome Shri. Ajay Shankar Ji, Member Secretary N.M.C.C. as Chief Guest and Shri.Prem Malik Ji, Chairman C.I.T.I. as Guest of Honor and it is a great pleasure and honour for all of us to have them with us today. With these words, I once again welcome Shri.Ajay Shankar Ji and Shri.Prem Malik Ji and I am thankful that in spite of their busy schedule they has taken time for us and grace the occasion with their esteemed presence.”
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 2013-14 and Audited Accounts along with the Auditor’s Report for the year ended 31st March 2014 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.
Initially I would like to mention that during the current year we have seen significant changes in the political and economic landscape of our country. We have a new government at the centre with a stable mandate and there is a strong expectation in the business community that this will help the government to take positive economic decisions with wider administrative and procedural reforms. The honourable Prime Minister is on record about the importance of the textiles industry in the country’s economy and the need to assist it for faster growth. Textiles industry is one area where the PM’s progressive vision of ‘Make in India’ can be realised quickly and effectively. Smt.Zohra Chatterjee, past Secretary Textiles informed us that during her presentation to honourable Prime Minister, she has emphasized the “Denim Industry as sun rise sector” in the Textile Industry of India and also apprised Minister about our vision for branding of India made Denim.
Friends I am glad to state that, latest economic indicators show a possible revival of the country’s economy. Both financial and capital markets have been witnessing stability and resilience during the last few months which is a strong indication of economic revival. External trade is witnessing impressive growth which is expected to be sustained in the coming quarters too. Manufacturing sector has also witnessed some growth recovery in the first quarter of the current financial year. However, for the economy to regain its verve, the manufacturing sector has to come back to double digit growth. That is not yet happening, but I am hopeful that the emerging business optimism and the effective policy interventions by the new government would bring back the growth momentum to the entire economy including the manufacturing sector.
Friends now 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 10% over the last decade and is expected to grow at similar compounded rates over next few years. This growth has been primarily been on account of tremendous growth in the Domestic Market. 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 65% of the population is below the age of 35 years, our denim consumption will steadily increase.
The current installed capacity of denim fabric production stands at about 1.1 billion meters per annum. Even if the capacity continues to grow at even 10 percent in coming year, India will cross the magical mark of 1.2 billion meters by 2015.
The current domestic consumption of Indian denim is approx. 650 million meters and export of denim fabric from India is approx. 150 million meters which implies that capacity utilisation is approx. 80% at present.
As of year ended March 2014, India’s total merchandise exports stood at US $ 314 billion. Out this Textiles & Clothing exports stood at US $ 37 billion. T&C is the 3rd largest item of export after Petrochemicals Products & Precious Stones/Jewllery.
In the Textiles & Clothing basket, Cotton Woven Fabric Exports contribute US $ 1.7 billion. We are pleased to inform Denim woven fabric exports (HS Codes 52094200 & 52114200) stood at US $ 316 Million making it the single largest item among all kinds of woven fabric. This means approximately 20% of the woven fabric exported out of India is Denim Fabric.
Presently Indian denim industry is facing a situation of over capacity as there is demand and supply mismatch. There is major liquidity problem in the domestic market alongwith temporary pressure on prices.
The Indian denim manufacturers also see a good opportunity for growth in export markets. Potential in exports have increased as production in China has become expensive due to increase in labour costs. India is the 2nd Largest producer of Cotton in the world which is the main raw material to produce Denim Fabrics. Hence India has an edge over other Denim Producing countries.
However, India will continue to face increased competition from neighbouring countries like Pakistan and Bangladesh, who enjoy advantage of low labour costs, depreciated currency and duty free access to the major consuming markets like Europe and America. Their labour laws are far more flexible, encouraging most of the Denim Manufacturers to go for “forward integration” into making Garments, which is a highly labour intensive activity. Denim Mills in Pakistan & Bangladesh offer a single window solution to the customer, as they offer a total garment package.
Leading brands & retailers, world over, give preference to deal with suppliers who can offer a total garment solution, as they would rather focus their entire energies in retailing their products, rather than wasting them in managing a complex clothing supply chain.
To allow the denim export industry to grow at a rate of 10 percent, it is important that the Government should frame policies which encourage Denim Manufacturers to go for vertical integration and setup Garment manufacturing & Laundry facilities so as to offer single window garment package solution on the lines of Pakistan & Bangladesh. This will also enable the industry to create a brand “India Made 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 especially in the area of garment washing which helps in imparting the real fashion aspect in a Denim Garment. We should also make efforts to see how the entire manufacturing process can be made more and more environment friendly.
COTTON OUTLOOK
Domestic
As per the last C.A.B. estimates as on 2nd July 2014, the state-wise Cotton Production for season 2013-14 is 390 lakh bales in comparison to cotton season 2012-13 for 365 lakh bales and Cotton consumption for year 2013-14 is 287 lakh bales in comparison to cotton season 2012-13 for 283 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 2013-14 as on 2nd July 2014 would be around 32 lakh bales in comparison to cotton season 2012-13 for 35 lakh bales.
Global
According to a projections of I.C.A.C. as on 1-7-2014 the world ending stock for Cotton for year 2013-14 i.e. 20.20 Metric Tons.
As per ICAC estimates as on 4th September 2014 in 2014/15 world cotton industry is expected to enter its fifth consecutive season in which production exceeds consumption.
World production is forecast to decline by 400,000 tons to 26.05 million tons while consumption could grow by 4% to 24.4 million tons, resulting in a surplus of 1.7 million tons.
As a result of the cumulative surplus, world ending stocks are projected to increase to 22.2 million tons at the end of 2014/15.
Friends, today cotton scenario is incomplete without looking at China which holds more than 60% of the world cotton reserves and now they have started reducing the same which can have major impact on cotton prices. Sales from the Chinese reserve reached 2.3 million tons in 2013/14. During August 2014, the government sold an additional 300,000 tons, which reduces estimated cotton stocks held in reserves at around 11 million tons.
ICAC expects that over the next few years, the Chinese government will maintain sales from the reserve at a pace of 2-3 million tons a year.
World trade is projected to decline by 1 million tons to 8 million tons in 2014/15, which is largely accounted for by a 30% decrease in Chinese imports to 2 million tons.
TECHNOLOGY UPGRADATION FUND:
Friends, Technology Upgradation fund Scheme launched by government in 1999 is perhaps the best example of what proactive policy measures can do to improve the competitiveness of the industry. There have been some serious implementation problems in T.U.F.S. during last 2 years. D.M.A. along with C.I.T.I. and N.I.T.M.A. have been making continuous and concerted efforts to address the TUF issue, viz., extending TUF benefits for the pending cases, bank default cases, black out period cases and addition of new machinery under the list of eligible machinery under the said scheme.
Friends, Dr. K Sambasiva Rao, Past Union Textile Minister have processed the files on a fast track mode and got the clearance for the new TUF scheme for the 12th five year plan period without any blackout period and also for all the pending cases I am hopeful that some positive solutions will emerge soon.
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 Textile Sector Skill Council (TSC) promoted by CITI under the aegis of the National Skills Development Corporation (NSDC) is now operational and the first meeting of the governing council of TSC has already been held.
To fill up the demand supply gap, a focused and financially sustainable strategy for mobilizing and training workers needs to be put in place. There is also need to retrain and redeploy the workers from unviable units to more viable and sustainable streams.. TSC is incubated by textile industry associations and training providers including textile research associations and office of the Development Commissioner for Handlooms. It will be the nodal body to set skills bench marks and competency framework for textile workforce. It will provide accreditation to training partners and arrange evaluation and certification of students passing out from various education institutions which have accepted the curriculum and competencies adopted by TSC.
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.
Goods and Services Tax (GST)
Friends, we are all eagerly awaiting the introduction of GST in India and government seems to be progressing well on this front. The textiles industry has a large chunk of small scale units that include highly fragmented power loom and handloom units, small knitting and crocheting units and small scale garmenting units. Any exemptions in GST are bound to become another trigger for fragmentation in several segments of the T&C industry. Leveraging of TUFS and corresponding technological up-gradation process might also run into problems, since fragmented sub sectors tend not to use them much. The consensus in the industry is that GST should cover all textile producers without exemption for any segments or groups and the lowest available slab in GST rates should apply to the sector. I would request government to keep this in mind while finalising the GST regime.
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 4 times during last year and members have met 5 times during last year for discussing issues and prospects of denim industry.
In October 2013, a delegation consisting of 15 Members also went to Shanghai, China for attending 2 important Denim Trade Fairs namely Premier Vision and Inter-Textile for studying the latest denim trends, value addition in washing & garmenting and processing which was very educative.
Apart from these meetings D.M.A. have sent 12 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, Minister of 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. S.K.Gupta, Shri. Akhilesh Rathi, Shri. Atul Singh, Shri Ashish Shah, Shri Aamir Akhtar and Shri. Rajiv Dayal 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.