Textile Industry Seeks Competitive Raw Material Prices

Context

The textile industry is one of the largest industries in the Indian economy and has remained a key sector in India for several centuries now. It also provides a huge number of people employment and plays a significant role in exportation of Indian products. Nevertheless, the problem that is being noted at the moment is in the area of procurement of materials that are raw materials for the industry at lower costs.

Challenges faced by the textile industry

• High raw material costs: Nevertheless, much to the dismay of the industry, many of the raw materials have increase in their prices for various reasons and considering the fact that a raw material such as fabric materials including cotton, polyester, nylon and others; it becomes very difficult for the industry to contain the rising cost.
• Fluctuating prices of cotton and other raw materials: Still another problem that has been noted in the textile/beneficiaries industrial sector is the fluctuating prices of the raw materials necessary for the manufacture of fabrics, such as the cotton.
• Dependence on imported raw materials: Because many raw materials are imported especially cotton the sector has major challenges of price and market access which runs through the value chain.
• Increasing competition from other countries: The living standard in India is not as favourable as that of other countries like China, Bangladesh, and Vietnam; hence, the textile industry in India faces stiff competition from these countries which offer low prices since the wages for their workers are much lower than the Indian standard.

Impact on the industry

• Reduced profitability: Because of this there has been a problem of high cost of raw materials and prices, this has of course created difficulties in making good revenues and increases in reinvestment on other fronts like acquisition of new technologies or expansion of production capacity.
• Decreased production: One of the weaknesses in the company is that it has not been easy to control the costs as the cost of raw materials has increased and the company finds it difficult to always estimate the amount of money that it will spend to produce its products.
• Increased prices of finished goods: High cost of material used in its production has also been amplified to have an adverse effect on its products, though have proven to be relatively expensive compared to its counterparts from other countries.
• Loss of market share: That is why today the industry has not mastered the production of goods that correspond to the modern level of competition between countries.

Measures sought by the industry

• Duty-free import of raw materials: The industry has the vision of the government for free and sweet importation of raw material in a bid to make the industry cheaper and hence more competitive.
• Reduction in GST rates: For this very reason, the industry has complained and is calling on this government to reduce GST rates with a view of perhaps responding to this problem.
• Increase in import duty on finished goods: It is seeking the raw materials to be accorded a small import duty in order to assist various industries and reduce compatriot companies’ competitiveness from other nations.
• Support for research and development: There have been cries from the industry particularly from the producers for funding for the research work in an effort to improve the technology in the industry hence reducing on cost.

Government initiatives

• Introduction of the Textile Policy 2020: It is to mention here that the Pakistan Government has launched the Textile Policy 2020 for the growth of the textile industry of this country.
• Setting up of textile parks: The government has developed textile parks wherein infrastructure and related facilities for the industry have been established.
• Provision of subsidies for research and development: The government has initiated subsidies to operate the research and development to enhance the technology of the industry and also decrease the costs.
• Increase in import duty on finished goods: Further, the level of import duty on finished goods has been raised for the purpose of preventing local companies and industries from being out-competed by firms from other countries.

Conclusion

In conclusion, the textile industry in India is facing significant challenges in terms of raw material availability at competitive prices. These challenges are sought to be met by the industry through some points as below: Import of raw materials – free of duty The industry has suggested that the GST rates should be lowered and at the same time increase the import for finished product imports alongside availing support to conduct extensive research. The government has come up with several interventions towards enhancing the industry through the development of the Textile Policy 2020, establishment of textile parks, offering incentives to firms in the development of technology and also through the up-gradation import duty on ready-made products.

Source: The Hindu

UPSC Mains Practice Question

Q. Discuss the challenges faced by the textile industry in securing raw materials at competitive prices and suggest measures that can be implemented to address these issues. Consider the impact of global supply chains, domestic production capabilities, and policy interventions in your response.

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