Present & future of Indian textile engineering industry

Introduction

The Textile Engineering Industry (TEI) is, undoubtedly, oneof the largest component of the Indian capital goods industry and hascontributed significantly to the growth of the Indian textile industry. TheTEI directly employs about 50,000 workers and has capital investment in therange of US $ 423.93 Mn., with an installed capacity of US $ 920.54 Mn. Itcovers over 700 machineries and equipments manufacturing units; over 250 units produce complete machinery and the remaining 450 units produce spare parts, components andaccessories of the machinery. The major Indian companies that have a strong presence in the TEI include Lakshmi Machine Works (Coimbatore), Premier Evolvics, VeejayLakshmi, Himson, Precitex, Delux Bearings among others.

The technological competitiveness of the Indian textileengineering industry presents a full spectrum of technological capabilities.While, there are few units manufacturing spinning and allied machinery close tothe international players in terms of product design capability, process design capabilities and process technology, technological capabilities of most of theplayers manufacturing other than spinning and allied machinery is severelylimited.

The fortunes of this industry are inextricably linked withthat of textile industry. High degree of co-relation between the performancesof the two sectors is further accentuated by high elasticity of textileengineering industry to changes in the textile industry. The capital goodsvalue added contributes about 10.5 percent of the total textile manufacturingvalue added, thus establishing textile industry as a key end user deriving theperformance of the latter.

The textile industry has been doing extremely well duringthe last few years in terms of production & export and has been investingheavily in expansion and modernization of capacity. The strong demand fromdomestic and export market coupled with conducive policy environment provided by the Govt. has catalyses the growth of the textile industry. The TechnologyUpgradation Fund Scheme (TUFS) launched by the Govt. has facilitated investmentin state of the art / near state of the art benchmarked textile machineryeligible under TUFS. During the last eight years of the operation of TUFS,about US $ 28.86 Bn. worth of projects have been covered under TUFS involvinginstallation of roughly US $ 17.32 Bn. of modern machinery during the period.

Productiontrend of textile machinery

The sustained growth of the textile industry has also propelled the production of the textile engineering industry from US $ 244 Mn. in 2002-03 to US$ 618 Mn. in 2006-07 a compound annual rate of growth of 26 percent duringthe last five years. The maximum growth has been in the spinning and alliedmachinery which has increased at the annual rate of 38 percent. The year onyear growth of TEI has also been fluctuating in the range of 8 percent to 33percent during the last five years. The export intensity of this industry, whichwas in the range of 20-28 percent of production, in the last two years hasdeclined to 17.47 percent in 2006-2007.

Sector wise textile machinery production (MN US$)

The capacity utilization of the textile machinery industry which has been abysmally low at 31 percent in 2002-03 has gradually inched to 74 percent in 2006-07. However, it has still not reached 100 percent despite strong demand in the local market.

Segment wise Percentage in the Production of Textile Machinery

The structure of TEI is heavily skewed towards spinning and allied machinery to the extent of 72 percent of the total production, Weaving & allied machinery and processing machinery contribute only 6 percent each, unlike China where weaving, processing and knitting equipment manufacturing are also dominant.

Imports of textile machinery

This fact also underscores the strength of the Chinese fabric and garmenting industry unlike India which has a strong spinning industry but a weak weaving and processing and small size garment units.

Despite steady increase in production, this industry has not been able to keep pace with the demand of the textile industry which has increased from US $ 539.26 Mn. in 2002-03 to US $ 2,497.90 Mn. in 2006-07. The machinery industry has literally been caught unaware of the sudden spurt in demand.

Although the indigenous manufacturers are able to supply more, however, the demand is much higher and the gap is, therefore, bridged by imports. Infect, the share of indigenous manufacturers in total demand has declined from 30 percent in 2002-03 to 20 percent in 2006-07.

Over the years, the share of imports in total demand has increased even though the capacity utilization of the indigenous manufacturers has not even reached 80 percent. This shows that lack of adequate capacity to cater to rising demand is certainly not a constraint except probably for some large spinning machinery manufacturers who have an order backlog of around two years. The answer to this lies in the inadequate attention to the research and development by the indigenous industry.

The launch of TUFS has created a demand for state of the art / near state of the art machinery eligible under TUFS. The domestic industry, however, was not geared to meet up with demand for such machinery and result was large scale imports of machinery. The dismantling of textile units in European countries coupled with liberal policy with regard to import of second hand machinery also encouraged imports of second hand textile machinery. The import of machinery has increased significantly from US $ 293 million in 2001-02 to US $ 2083 million in 2006-07. The major countries of imports are Germany, China, Switzerland, Japan and Italy. These five countries contribute more than 83 percent of total imports of machinery.

This scenario is completely opposite in China which has relied not only on machinery imports but has also simultaneously strengthened its own machinery manufacturing base by encouraging both the domestic investments and FDI. The Chinese machinery industry has focused on long term technology introduction and scientific research thereby acquiring abilities to supply various textile equipments in the domestic and overseas market. The entry of foreign equipment manufacturers such as ITEMA Group, Staubli, Reiter etc. in China through wholly owned subsidiaries and joint ventures has also helped promote the advancement of Chinas textile machinery industry through technology transfer and competitive pressures between local and foreign manufacturers. It is projected that Chinas machine sales will reach about US $ 6.33 billion this year up from US $ 5.5 billion last year with exports amounting to US $ 1 billion. Due to increase in production, the Chinas reliance on imported machinery has gradually reduced. The import of textile machinery in China declined by 40 percent from US $ 3.31 billion in 2003 to US $ 1.97 billion in 2006. There is no doubt that textile machinery industry with its inherent strengths and long standing in the industry can replicate the success story of China in meeting the indigenous demand.

Future scenario of textile engineering industry

The TEI has to anticipate the demand of various segments and identify the machinery and work towards producing those machinery. The TEI has to prepare a action oriented plan and focus on R & D, technology transfer to produce the machinery for the identified segment suitable for Indian industry. The Govt. has decided on strategy of garment led growth to pull up the entire textile value chain. The Govt. has also identified weak segments like weaving, processing and emerging areas like technical textiles as thrust areas with special focus in terms of incremental incentives. The demand for modern machinery for the thrust areas will be generated due to the Govt. incentives. The TEI has to develop the machinery with appropriate technology and price suitable for those segments of the textile industry.

The Govt. has targeted 16 percent growth in value terms of textile industry to reach the market size of US $ 115 billion by the end of Eleventh Five Year Plan. To reach this level of activity, the existing capacities will not be adequate and the incremental capacities will need to be installed with projected investment of US $ 36.48 Bn. The incremental capacities along with the investment requirement is given below:

Segment-wise incremental machinery and investment requirement

         * Including replacement of machinery

Source: Report of the Working Group on textiles and jute industry for the Eleventh Five Year Plan.

The TEI should plan to meet the incremental requirement of machinery for different segments. As per the projected machinery requirement the spinning industry will be requiring about 5.8 million spindles per annum. As against this, the capacity of the indigenous machinery manufacturers is only 3.5 million spindles. Therefore, they have to augment their capacity immediately. Further, 20000 shuttleless looms will be required by the weaving industry each year while the existing capacity of the indigenous machinery manufacturers is only 5000. The machinery manufacturers will have to augment their capacities for spinning, weaving, knitting, processing and garmenting machinery at appropriate technology level meeting with the requirement of the different segments of the textile industry.

The growth of the textile machinery industry is also projected to increase at the rate of 30 percent per annum during the Eleventh Plan period and reach the level of US $ 2495.16 by the end of the Eleventh Five Year Plan.

However, even these capacities will not be able to cater to the total demand of the textile industry. Therefore, TEI has to exceed the projected targets.

Source: Report of the Working Group on Textiles & Jute Industry for the Eleventh Five-Year Plan (2007-2012)

The textile machinery industry has to focus on R & D to develop technology that can compete not only with the sophisticated machines from western countries but also cheaper products from China and Korea.

The R & D efforts are particularly required in downstream segments like weaving, knitting, processing and garmenting where the presence of the indigenous industry is insignificant. The industry should take advantage of Mission Mode Programme on Upgradation of Textile Machinery / Product / Process under the umbrella scheme of Technology Vision 2020 operated by Technology Information Forecasting Assessment Council (TIFAC), Dept. of Science and Technology, New Delhi.

The programnme supports and facilitates developing, demonstration, standardizing market selected textile processes, products, equipments, machinery and related components towards its commercialization. The technology development assistance is available on repayable basis to the industry and R & D bodies for development of specific technologies in the target areas.

The Foreign Direct Investment (FDI) also needs to be attracted in the textile machinery industry. One of the biggest factors that have triggered the growth of the Chinese industry is the domestic availability of the textiles machinery.

Globally reputed textiles machinery manufacturers have set up units in China, and have developed models which are suitable to the Chinese industry. India has to encourage the global manufacturers to set up similar units in India to meet the requirement of the Indian textile industry. Some of the reputed machinery manufactures have already shown interest in setting up units in India.

Swiss textile machinery giant Rieter has already announced plans to invest US $50 million in India over the next five years. Taiwans Dogetech, specialized in textile accessories / Pre-Spinning machinery is also planning to set up plants in Coimbatore and Kolhapur and other global textile machinery giants like Sulzer, Picanol, Saurer, Truetzchelr are evaluating the economies of shifting production to Indian subcontinent. It is estimated that if global textile machinery giants set up production base in India, they would be able to sell at 60% of their current prices to Indian consumers, which would translate into a huge cost advantage.

The domestic machinery manufacturers should also enter into joint venture and strategic alliances with global manufacturers to take advantage of the technology transfer.

The lower cost of manufacturing in India with adequate level of indigenisation should enable the local manufacturers of textile machinery to bridge the price differential with imported second hand machines through competitive pricing and lower logistics cost.

Conclusion

The opportunities are knocking the doors of textile engineering industry in terms of growing demand of textile machinery in the domestic market and also in the neighbouring countries which are emerging as textile economies. The moot point is whether TEI can gear up in terms of scaling up of capacity and technology level to take advantage of the growing demand.

The imports of textile machinery by Bangladesh, Pakistan, Sri Lanka, Indonesia are growing steadily. A vibrant textile machinery industry will not only support indigenous textile industry in its accelerated growth path but will also cater to the requirement of the neighbouring countries. An image of global player with local prices will catapulate this industry to the unprecedented heights.

About the Author:

The author is the Jt. Textile Commissioner.