Government policies propel Odisha's textile sector towards growth

The state is exclusively known for its handloom products due to the availability of clusters like Sambalpur, Nuapatna, Bargarh, and Berhampur. These clusters could achieve excellent heights if the government focuses on revitalising the textile sector through skill development, financial assistance, and marketing support. The existing involvement of 99-plus textile manufacturing companies depicts the steady efforts undertaken by the government to promote textiles.

Currently, the state faces challenges such as inadequate infrastructure, lack of skilled labour, competition from other states, and issues related to power supply and transportation, especially in the power loom sector in regions like Bargarh, Bhawanipatna, and Barpali.

Odisha has been making efforts to promote textile and apparel manufacturing as part of its industrial growth strategy.

Buoyed by the implementation of the Odisha Apparel Policy 2016, the Odisha Apparel and Technical Textiles Policy 2022 has been formulated to encourage garment, apparel, made-ups, and technical textiles (agrotech, clothtech, hometech, meditech, sportech, packtech, buildtech, geotech, indutech, mobiltech, protech, oekotech) by supporting activities such as ginning, spinning, weaving, dyeing, and processing of textiles wearables and accessories linked to apparel and technical textiles.

Odisha has emerged as a destination of choice for investors in the textile sector. It is worth mentioning that the state produces 5-6 lakh bales of high-quality cotton (30 mm staple length). Hence, the raw material base for the textile industry, particularly for cotton textiles and silk-based industries, is huge and readily available in the state. The presence of a textile park in Bhadrak will facilitate 300 KTPA IOCL polyester to the state, diversifying the state textile portfolio.

It is estimated that the textiles and handloom industry in the state is about ₹600 crore, employing about 2 lakh people both in the organised and unorganised sectors of manufacturing.

Figure 1: Classification of textile manufacturing companies

Source - Fliar Business Intelligence Private Limited

Figure 2: Polyester feedstock availability in KTPA (kilo tons per annum)

Source – Invest India

Welspun, a prominent leader in the home textiles segment, has recently injected ₹3,050 crore into Odisha as part of its total investment of ₹13,860 crore. While this current investment may momentarily inflate borrowing figures and trim surplus, it's a strategic move aimed at long-term growth. By bolstering its non-current investments, Welspun ensures a promising future for its textile division, assuring increased output and profitability.

The company eyeing an investment in Odisha showcases robust financial health, marked by a bolstered balance sheet featuring escalating revenues and a growing surplus. This surplus serves as an additional resource, readily available for potential utilisation as needed. Furthermore, the company exhibits an admirable trend with a consistent reduction in debt year after year.

Figure 3: Net revenue and reserves and surplus of Welspun Living (in ₹ crore)

Source - Dion Global Solutions Limited*

Figure 4: Borrowings of Welspun Living (in ₹ crore)

Source - Dion Global Solutions Limited *

Given the healthy revenue, surplus, and declining debt, it is increasingly likely that the company will opt to finance its current investments partially through surplus funds and partly through debt. This approach raises the prospect of an uptick in non-current liabilities. However, juxtaposed against this is the promise inherent in the current investment, which holds the potential to substantially augment revenue from operations over the long term.

The capital subsidy, which is a proportion of cost that the government will cover for the concerned company in the sector, as mentioned by the government of Odisha, is 40 per cent of the cost, with a cap of ₹50 crore if the company is eligible. If Welspun becomes eligible for the subsidy, a significant proportion of the initial cost will be saved for the company, thus adding to the surplus of the company. Along with this an employment cost subsidy, where the government pays for the cost of employment for a period of five years also may benefit the company indirectly in saving the costs and facilitating long term investment.

Moreover, seven leading apparel and garment manufacturing units in Odisha recently received project approval letters from minister Pratap Keshari Deb. These industries chose Odisha due to its favourable business environment, stable government, and efficient approval processes. The total project cost for these units is ₹378.98 crore, with the potential to create employment for 18,620 individuals.

The approved projects include Meenu Creation LLP, with a project cost of ₹57.78 crore, Pooja International and Sonu Exim Pvt Ltd with project costs of ₹55.00 crore each, Rainbow Fabart Private Limited, with a project cost of ₹52 crore, B L International Private Limited will invest ₹51.10 crore, Fine Lines’s project cost is ₹58.00 crore, and Golden Seams Industries Pvt Ltd will invest ₹50.1 crore.

Note:

*Standalone figures are considered for evaluation for the financial year, not the calendar year.

ALCHEMPro News Desk (NJS)