Q-and-A

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A few days ago, Tirupur Ex­porters’ As­so­ci­a­tion (TEA) re­quested its mem­bers to ask their buy­ers to in­crease the gar­ment prices by 10 per cent as over­all cost­ing is in­creas­ing. TEA felt that the con­tin­u­a­tion of the same prices would cer­tainly lead to a more dif­fi­cult sit­u­a­tion mak­ing it less vi­able for ex­porters to sus­tain in busi­ness. Top sourc­ing pro­fes­sion­als are of the opin­ion that such ini­tia­tives will not solve any prob­lem and might make them more worse. Or­ders will drift away from In­dia if buy­ers feel prices are in­creas­ing. Sup­pli­ers must, there­fore, work to­wards stream­lin­ing and elim­i­nat­ing losses in the sup­ply chain.

Be­ing a stake­holder of the in­dus­try, how do you see this is­sue? What can be the plau­si­ble so­lu­tion…?

Vi­jay Jin­dal, SPL Lim­ited, Farid­abad

We are in a mar­ket which is fac­ing global com­pe­ti­tion, so ask­ing to in­crease the price can make busi­ness slip. So, rather than in­creas­ing the price, we need more sup­port from Govern­ment to in­crease RoSL and duty-draw­back rates to 5% which in­dus­try is de­mand­ing.

Vikram Jit Singh, Di­rec­tor, Fiori Cre­ations, Farid­abad

It is oft-re­peated and ab­surd de­mand. Let me be­gin with two sim­ple ques­tions. When was the last time you wor­ried that your mo­bile plan from your tele­com com­pany could be mak­ing loss for the com­pany? Would you pay more than other avail­able plans to en­sure your ser­vice provider makes a fair profit? Your an­swers will be ‘Never' and ‘No’, re­spec­tively.

In the­ory, our cus­tomers should pay a fair price con­sid­er­ing their re­quire­ments whether it is de­sign, com­pli­ance, qual­ity, or en­vi­ron­men­tal stan­dards. Those who want us to hold to cer­tain be­hav­iour must be will­ing to pay for the priv­i­lege of as­sur­ing their cus­tomers that their en­tire sup­ply chain op­er­ates in a cer­tain way. How­ever, as we all know, in re­al­ity, it is sim­ply ‘might is right’. Or­ders get placed based on ‘cents and not stan­dards’. Suf­fi­cient pa­per­work is gen­er­ated on file to show ad­her­ence. Any de­vi­a­tion can sim­ply be blamed on the fac­tory later. We are com­pet­ing in a glob­alised, fiercely com­pet­i­tive open mar­ket. The ways to ap­proach it is to work on speed, cut waste and de­velop niches. That will pay off, ei­ther in sav­ings or higher prices. The other sen­si­ble op­tion is to leave those or­ders where there is no profit. Try that for a change.

G. Manikan­dan,

CEO, Ap­parel Global Con­sult­ing, Cossmo Tex, Tirupur

I would cer­tainly not say that the re­quest by TEA will make a neg­a­tive im­pact on ex­port sales. How­ever, 10% is not a wise thing. More im­por­tantly, we dearly need to ad­dress the in­ter­nal cost­ing fac­tors se­ri­ously as there is no mech­a­nism to con­trol these. Yes, it is high time to look at our sup­ply chain and man­u­fac­tur­ing ef­fi­ciency. The un­seen mar­gin is to be found by us and not by cus­tomers since their econ­omy is not do­ing bet­ter than us to ab­sorb higher prices. More chances are that they will look for new av­enues to source their de­mand.

SP Mun­dra, MD, Ra­jat Col­lec­tions, Ban­ga­lore

I per­fectly agree with the view that any in­crease in the sell­ing price will com­pletely jeop­ar­dise the al­ready dwin­dling ex­ports. The prices from our emerg­ing com­peti­tors are lower. please take a sur­vey of prices in Cam­bo­dia, Viet­nam etc., and one will see what we are star­ing at. In ad­di­tion, the over­seas buy­ers nowa­days are ex­tremely smart. They keep a tab on our fall­ing ru­pee and im­me­di­ately pounce on us to re­duce the prices! Where is the ques­tion of an in­crease? With sev­eral over­seas buy­ers hav­ing their buy­ing agents in In­dia, these buy­ing agents are also guilty of keep­ing the buy­ers ed­u­cated on the ex­change rate sce­nario.

M. Ganesh Babu, Pro­pri­etor, Su­darsan Cloth­ing Co., Tirupur

This move is un­doubt­edly a good one. Tirupur gar­ment ex­porters are pro­vid­ing such qual­ity and ser­vices to com­mand that 10% pre­mium from the buy­ers. And now that the price in­crease is an in­dex, we ex­porters will be able to pocket it. Fash­ion is va­ri­ety. I have never seen two peo­ple in the same kind of out­fit. So as long as this re­mains true, Tirupur's gar­ment pro­duc­tion will re­main in­dis­pens­able in the world of tex­tiles. For our strengths lie in small quan­tity runs, short de­liv­er­ies, mul­ti­ple tires of sam­pling and cop­ing with last minute changes. All this, how­ever, means spi­ralling fixed over­head costs to run our fac­to­ries.

The Govern­ment too needs to de­velop a con­sis­tent pol­icy to­wards gar­ment ex­ports. Most part of this regime was spent ne­glect­ing ex­ports, sav­ing on its sops and pleas­ing the WTO. Af­ter the failed FDI at­tempts, the Govern­ment is knock­ing at our doors once again.

The duty-draw­back needs to be in­creased to at least 5% over­all. Other­wise we gar­ment man­u­fac­tur­ers will be left with no other choice but to look at Ethiopia or Viet­nam to build ad­di­tional ca­pac­i­ties.

Zahir SAIT, In­ter­na­tional Trad­ing Com­pany, Tirupur

The tex­tile in­dus­try is the only in­dus­try which shifts its coun­try ac­cord­ing to cost. In­creas­ing the sell­ing price by 10% is not go­ing to solve the is­sue of be­ing com­pet­i­tive. Tirupur is known for its mass mar­ket clients who are very price-sen­si­tive and is also not pop­u­lar for val­ueadded prod­ucts. I be­lieve the

only way to be com­pet­i­tive is that the Govern­ment in­creases the in­cen­tive for in­dus­tries that em­ploy a large amount of man­power.

We have been talk­ing about sus­tain­abil­ity for the last cou­ple of years but sus­tain­abil­ity in the true sense is be­ing able to man­age cost through change with­out in­creas­ing sell­ing prices for cus­tomers at this given point of time, else they will move away from In­dia.

R Sab­hari Girish,

CEO, Award As­so­ci­ates, Tirupur/Noida

With the in­crease in prices of yarns and other at­tributes, it is in­evitable that the ex­porters get a bet­ter price from the buyer. This is the first time in the his­tory that TEA has sent a cir­cu­lar like this. Look­ing at the pre­vail­ing re­tail cli­mate, buy­ers have been aim­ing for cost price re­duc­tion since the ear­lier sea­sons. If we de­mand 10% in­crease in price, we will be help­ing our com­peti­tors to grab our or­ders. It’s high time that the ex­porters should be look­ing for the elim­i­na­tion of wastage, in­crease in pro­duc­tiv­ity and for pro­vid­ing some value ad­di­tions, like de­sign in­put and sail through this sit­u­a­tion.

1. Cut-to-Ship Ra­tio: Fac­to­ries are plan­ning for over­all 107% ra­tio, cut­ting be­ing 105% and ship­ping be­ing 97% on an av­er­age. With the cur­rent sit­u­a­tion, we don’t have a lux­ury of wast­ing 9% to 10% which is re­ally huge. The re­jec­tions should be elim­i­nated and the cut-to­ship ra­tio should dras­ti­cally nar­row down.

2. Strong Ex­change Rates: Strong cur­ren­cies are an­other boon, where on an av­er­age, there is an in­crease of ap­prox­i­mately 5% on the ma­jor cur­ren­cies, com­pared with the same sea­son last year.

3. Good IE Prac­tices: We are still way be­hind on ef­fi­ciency. The cur­rent ef­fi­ciency is less than 40% for most of the fac­to­ries and this is a rea­son for higher con­cern. We are well be­low the global bench­mark; only by fol­low­ing proper IE prac­tices will we be able to im­prove the pro­duc­tiv­ity. If the ef­fi­ciency is brought to 60%, the turn­around will be made quicker and the same can im­prove by 33%, the profit too in­creases.

Viren­der Bak­shi, Coun­try Head, Ser­gent Ma­jor, Tirupur

In the pre­sent sce­nario the ex­porters have al­ready been hit by many rea­sons like re­ces­sion/ low de­mand in buy­ing coun­tries, funds block­age due to their GST re­fund de­lay, higher or in­creas­ing labour cost, in­creased or un­sta­ble cot­ton or yarn prices, re­duc­tion in these in­cen­tives or du­ty­draw­back dis­ad­van­tage or un­com­pet­i­tive­ness in front of other neigh­bour­ing tex­tile ex­port­ing coun­tries due to their low labour cost and also the FTA ad­van­tage which they have over In­dia.

Def­i­nitely in­creas­ing price is not at all a good so­lu­tion as no buyer will pay a higher price when they get the same item from our neigh­bour­ing coun­tries at a lower price, that too with duty-free im­port into Europe. I am sure ex­porters must be do­ing their best to stream­line and elim­i­nate the losses in the sup­ply chain, and some of them must have al­ready done that. In the pre­sent sce­nario,

I do not see any al­ter­nate or a good so­lu­tion, ex­cept to look for al­ter­na­tive and new mar­kets; mak­ing pre­sen­ta­tions to the Govern­ment, and re­quest­ing them to pro­vide ex­port fi­nance against or­ders at more com­pet­i­tive rates. Also ra­tioning of raw cot­ton or even yarn ex­ports can be made so that we stay com­pet­i­tive.

The Govern­ment can also be asked to in­crease the in­cen­tives against ex­ports and put FTA into ex­is­tence for tex­tile alone in a clus­ter man­ner with­out wait­ing for to­tal FTA im­ple­men­ta­tion.

Meenu N Bhat, Tan­nvi Im­pex, Noida

My sug­ges­tion is to first pre­pare cus­tomers for this in­crease with suf­fi­cient rea­son­ing and some proofs so that prepa­ra­tions can be made. The need is to di­vide this into two phases with some time pe­riod. In the first phase, let TEA ex­am­ine if price in­crease proves ben­e­fi­cial to the man­u­fac­turer, and based on that in­tro­duce the next phase and move fur­ther with time and sit­u­a­tion, else switch back to the old rates.

Ra­jen­dran, Adarsh Knitwear, Tirupur

This price rise is an in­ter­na­tional prob­lem and wher­ever the buy­ers go, they will have the same prob­lem. I am sure buy­ers can ac­com­mo­date this price and in­crease the re­tail price ac­cord­ingly.

Vivek Sax­ena, Di­rec­tor, Mois­san­ite Ap­par­els, Noida

In­creas­ing prices is a wish­ful thought of ‘In­dian ex­porters’, but dur­ing my per­sonal vis­its and meet­ings with buy­ers in the months of May and June, in Madrid, New York, Shang­hai and Hong Kong, no buyer was will­ing to in­crease any price. Buy­ers are rather ready to eas­ily move the or­ders to Viet­nam, Cam­bo­dia, In­done­sia, Myan­mar, and Bangladesh at the drop of a hat. There have been so many ar­ti­cles and lec­tures by em­i­nent econ­o­mists of our coun­try, stat­ing that ‘curb­ing im­ports alone will not help, it is only by in­creas­ing ex­ports that we will be able to sur­vive’. The news of the

US $ 17 bil­lion deficit in trade in the month of June ’18, should be an­other warn­ing sig­nal for all. This can be a topic of end­less dis­cus­sion, but even­tu­ally the pol­i­cy­mak­ers will have to find a way out!

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