Surat textile sector plagued by high costs

Surat’s textile weavers and processors are facing the third crisis in about 18 months. In November 2016, high-value currency notes were withdrawn, rendering Surat’s economy paralysed because it is largely cashbased, involving small processors and migrant employees.

Last July, industry was shut for long after the goods and services tax (GST) was imposed because textile processors’ costs, along with the compliance burden, increased sharply.

In the past one month, polyester yarn prices have increased 6-8 per cent and, in the past three months, between 12 and 15 per cent.

This is happening at a time when the demand for fabric is low. The demand will revive only when the festival season begins a few months later.

Due to there being 13 months in the Gujarati calendar, festivals will start with a month’s delay.

On Monday there was a meeting of Surat power loom co-operatives and job workers. In the meeting, they proposed reducing daily operating shifts from three to two.

Industry associations and cooperatives have decided to work in two shifts of six hours or eight hours.

Employees are going on leave. Reducing shifts means a fall in production. A leading composite mill executive said after the GST was introduced, there was a 33 per cent fall in Surat’s synthetic fabric production.

Ashish Gujarati, president, Pandesara Weavers Co-op Society, Surat, said: “Surat’s textile industry has not been doing well since the GST was imposed. Fabric production has seen a significant fall. Now rising yarn prices have forced us to cut production by reducing the number of shifts.”

Most weavers’ cooperatives and job works have together decided to cut one shift. If yarn is not weaved and fabric is not produced, job workers will not have much processing work. Dhiraj Shah, managing director, Shahlon Group, says crude oil prices are rising for many months. As a result, prices of petrochemicals, raw material for producing polyester yarn, are going up.

Shah said “at the time when the slack demand season has begun, weavers have decided to cut production”.

Power looms have another problem, which, according to a decision in the meeting, will be conveyed to the finance ministry. The GST on synthetic fabric is 5 per cent while that on yarn is 12 per cent. This means when they sell fabric, they will not be able to claim full GST refund and hence a huge amount of unused tax credit will remain on their books.