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Ukraine war, high prices of raw materials, breaking the Tiruppur garment export business: Raja Shanmugham

- April 3, 2022

Arun Lakshman/ Chennai

Raja A. Shanmugham, the vibrant president of Tiruppur Exporters Association (TEA) said that the industry which is often referred to as the hosiery capital of South India and the Manchester of South is facing an acute crisis. He said that the heavy increase in raw cotton prices has already led to the business stumbling but the Ukraine war has in fact taken the business to a new low and that the industry is reeling under its impact.  The businessman who himself is exporting to Europe said that the market was slowly staging a comeback after the Covid -19 inflicted crisis for the past two years and expected that the war is over and prices of raw cotton comes down so that the industry comes back to normal providing employment to the 6 lakh strong labourers and provide huge foreign exchange revenue for the country and support the families of the exporters.

The industry had projected revenue of 33000 crores from the Export business and 32000 crores from the domestic market with a total market cap of Rs 65000 crore. He said that unless the governments support the cause of the exporter units and strictly monitor the raw cotton pricing, the industry will face the heat even after the war between Ukraine and Russia comes to a close.

In an interview with IANS, the exporter association leader expressed his concern as well expectations.

Tiruppur garment exports are facing the heat over Ukraine.
Please explain?

Yes we are facing the heat but still the full impact are yet to be felt and we have to face it. Right now the already lingering container problem got further escalated creating trouble to export our merchandise as there is a huge shortage of containers.
Moreover, all the  European brands do have garments selling stores both in Russia and Ukraine now got closed due to economic sanctions. Most of the reputed international brands have outsourced their work in Tiruppur and this has led to our industry crippling. Two things have a direct impact, the lack of containers and the showrooms of major European brands in Russia and Ukraine getting shut down.

Another issue that affects the market is the increase in fuel costs in Europe due to the war which has disrupted the spending power of the Europeans. It is to be noted that the fuel prices have increased by 30 to 40 per cent after the war.

The prolonging war has created a fear factor among all, particularly in the European region. Everyone is praying not getting escalated any further.
More than this garments buying is getting relegated to the last option. This will severely affect the Quantum of trade in the coming season and this obviously has a major impact on the existing employment.

Is the increase in Cotton price a reason for the hike in production cost?

Yes indeed. The increase in cotton price is a major reason for the hike in production costs. Other than that almost all the input costs have increased to an unprecedented level and have led to a major hike in production costs. An increase in production costs and major markets getting shutting down are the reasons for the slump in business in Tirupur. You see the raw cotton import duty is presently 11 per cent and we want that to be totally removed. With the import duty, the traders are making umpteen excuses to hike the price which is affecting our cost. The farmers would already have sold all their cotton to the traders and there is a large presence of Multi-National Companies (MNCs) in the cotton trade industry they are raising the prices under the guise of this import duty we want the government to remove that for a level playing field.

When do you expect a revival of fortunes in the trade?

Even as every exporter or for that matter every industry expects a revival of fortunes at the earliest, one or the other external factors are cropping up on a regular basis affecting our business. As everyone knows, the market is dominated by external factors and unfortunately, we are facing the brunt of these factors leading to staggering growth for us. While Covid -19 pandemic took two precious years away, the sudden development in Europe has a cascading effect on our fortunes. Anyway, we are expecting an immediate end to these crises and Tiruppur export industry regains its old health and vibrancy and provides more and more employment to the workers, giving a foreign exchange to our country and the industry itself becomes profitable. Being an optimist, I feel that the worse will pass and the industry regains its bubble and vitality.

As the industry is reeling under the effect of the Ukraine war, how it is affecting the labourers?

As you know this industry is labour centric and the cumulative impacts of this war would set an uncertainty on the job front. But as of now, we all survive with the available orders in spite of a lot of many challenges. We have a strong labour strength and there are around 6 lac labourers who are directly employed in the industry. We have labourers from across the country and in fact it’s a Pan India mix.  There are around 2.5 lakh North Indian labourers in our workforce and we provide them with all facilities including their lodging and a decent salary. We believe that the strength of the labourers is our strength and we move forward in this manner.

Can you explain us how you are planning to overcome the crisis in the industry?

We have chalked out a plan for survival by confirming orders in a no-profit situation. This will lead to our stocked materials being sold out and also help the buyers as the retail markets are all shut . We believe that we have to survive as a team and overcome this situation and with that understanding, we are proceeding ahead.

Do you feel that this would lead to other competing countries like Bangladesh and Vietnam taking advantage of the situation?

This problem is for all the competitors too and we cannot say that one country is gaining advantage in this crisis. But our competitors do have other advantages like Foreign Trade Agreements (FTAs) through which they are constantly and continuously progressing than us.

Covid 19 pandemic has taken a toll on all the industries and businesses and after a slow recovery will the new development take a major dip in your industry?

We wish that not to happen. Tiruppur has already passed through lots of challenges in its forward journey and as optimists we  hope that this also will pass over soon

Please let us know the annual turnover of the Tiruppur garment industry?

We are expecting a turnover of Rs 33000 Crore from the exports this financial year and another 32000 crores in the domestic market. Altogether, the total turnover this financial year that we expect is Rs 65000 crores.