Over the years, three Indian states Jharkhand, Telangana and Odisha have been successful in luring the apparel manufacturing industry to start units in their regions. Many Indian as well as few global companies have announced their intention to invest there. Few projects started and some even saw good results. Yet, the ground reports were contradictory with some reports claiming that these emerging hubs could not develop necessary allied support, be it enough skilled workforce, availability of raw material and support structure which impacted the prospective growth of the industry.
From time to time, there were some administrative issues too, so the overall industry could not grow here compared to the high hopes and claims of these states. But now in this COVID-19 phase when even well-established companies are consolidating their businesses, laying off their workers… will they be continuing their investments in these hubs? There are enough chances that these projects will be delayed. A ground report on the same answers most of the questions in this regard.
Ranchi losing charm
Ranchi (Jharkhand) took a lead among the three states as two units of top-level export house Orient Craft (OC), Gurugram, and one each of Arvind Ltd, Ahmedabad, and Kishor Exports, Agra have operational units in the location. More than a dozen big companies invested in land here and few of them started their training centres. To mention a few, big names like Shahi Exports, Matrix Clothing, Richa Global started operating here.
But ground reality was different than what was being projected even before the pandemic, as apart from the above mentioned three operational units, none of the companies started their full-fledged operations and even one SME wound up its operational units. And the sad story seems to continue.
Inside sources informed Apparel Resources that OC is winding up its set-up in Ranchi soon, though there is no official confirmation from the company. Currently the company has two factories in Ranchi with almost 1,500 machines there. This is a major setback, as OC was the flag-bearer of initiating apparel industry in Ranchi and its winding up will have a negative impact on the hub’s growth. The source claims that the company had made this plan even before COVID-19 broke out and now all these challenges have increased problems for the company.
As per inside reports, Rs. 22 crore worth of subsidy, is stuck with the State Government. It is being said that the new Government (formed just 5 months back) is not issuing subsidy to the garment companies while this subsidy was one of the biggest attractions for the companies to invest there.
On the other side, in recent development, the garment industry in Ranchi got support as a lot of workers who used to work in other states are now back to Jharkhand and wish to work in Ranchi. These workers are experienced and skilled also.
And this is also a reason that few entrepreneurs see Ranchi now with great potential and are planning to increase their production. Matrix Clothing, one of the leading apparel export houses of Gurugram, has a pilot project at Ranch with 165 machines and now the company is planning to run this unit in double shift. “I don’t think that projects will be delayed. The State Government should use this time as an opportunity to enhance the garment industry there. With reverse migration in a state like Jharkhand, and labour shortage in metro cities like Delhi-NCR, there are more opportunities in a city like Ranchi,” said Gautam Nair, MD, Matrix Clothing.
He further added that soon he will try to have a virtual meeting with the State’s Chief Minister Hemant Soren and discuss how the garment industry can be very fruitful for the state. Regarding the overall experience of working with state administration and subsidy related issues, Gautam is happy. “I must say that the Jharkhand Government is terrifically cooperative. The new Government takes some time on the policies of previous Government and has its own apprehensions, so we have to convince them about our issues,” he said.
As usual, there is a difference in views among various apparel exporters. Few exporters that have land in Ranchi also believe that projects will be delayed for at least one year. They strongly believe that currently, all their focus is on whatever business is there in their existing factories. Meenu Creations, Noida, is also among the companies that have announced an investment in Ranchi, but it has not started the same. Backing this thought, Anil Peshawari, MD of the company said, “Things totally depend on the further response of buyers. Whatever the conditions will be in future, there will be delay as far as starting of factories’ operations is concerned.”
AR approached various Government officials of the state in this regard but did not get any reply from them.
Not only Indian apparel manufacturing giants, but even few global and most respected names of the industry also made announcements to invest in these hubs. Hong Kong-based Epic Group preferred Ranchi while the Korean textile and apparel giant, Youngone Corporation preferred Telangana.
It has been 15 months when in mid-Feb 2019, Epic Group’s Chairman Ranjan Mahtani visited India, met Textile Minister Smriti Irani and announced the group’s entry in India. It was announced that the Epic Group will invest US $ 20 million in Ranchi unit and the project will create around 4,000 direct jobs. At that time, it was also said that the investment will be done in the initial two years to set up. The initial first year will go in setting up the unit and intensive training. AR also approached Epic Group about the development but did not receive any reply.
Projects on hold in Telangana
As far as Telangana is concerned, its Kakatiya Mega Textile Park (KMTP) in Warangal (Telangana) is one of the most talked about initiatives. Apart from Indian companies, in December 2019, Youngone Corporation signed an agreement with the Government of Telangana and announced that it will invest more than Rs. 900 crore in the KMTP. At that time, it was said that the investment will create around 12,000 direct jobs and apparel manufacturing was expected to start by August 2020.
But now it is official that there will be delay in most of these projects in the state, as a senior Government official of the state confirmed this to AR. In his statement, Jayesh Ranjan, Principal Secretary, Industries & Commerce (I&C) and Information Technology (IT), Government of Telangana informed, “Apparel manufacturing is one of the key focus areas of the Telangana State Government. Over the last couple of years, the State Government has taken steps to reach out to apparel manufacturers to set up their manufacturing units in Telangana. Some of the big industry players who have committed to invest in apparel manufacturing in Telangana include Youngone Corporation (Korea), Shoppers Stop (through its vendors), Texport Industries, and Gokaldas Images among others.”
He further added that the well-being of the apparel industry is tied to the demand for apparel from brands and retailers in the US and Europe. In the prevailing COVID-19 scenario, this demand has seen a temporary drop in these markets and accordingly, the apparel manufacturers are looking for ways to utilise their existing capacities before setting up new capacities.
However, the industry in general and the companies mentioned above in particular have reaffirmed their commitment to their investment plans agreed earlier. The timelines will definitely shift a bit, as the companies are busy navigating the current demand slump. The long-term view of the industry is nevertheless positive. Five years down the line, they will be manufacturing and consuming more and better value-added apparel products than they are doing today.
Jayesh also informed that the efforts by the Telangana Government to help apparel manufacturers set up their units in the state include providing ready-to-move inbuilt to suit units at nominal lease rentals for the first few years. This immediately takes away the risk of capital investments or long-term commitments and provides flexibility to the manufacturers to ramp up their capacities to meet the anticipated demand. Further, the State Government will provide trained manpower as per the industry requirements. The availability of a large pool of willing workers and pro-business government policies give Telangana an edge in attracting such units.
It is also pertinent to mention here that just a few days back in one of the webinars, one of the well-known industry leaders from Gurgaon clearly said that he was present at the opening wherein state’s senior official (who was very much involved in this initiative of KMTP) told him that leading Indian companies do believe that textile is a sunset industry and nobody is very keen to do fresh investment in a large project.
Odisha fails on multiple fronts
Odisha, one of the most politically stable and peaceful states of India, was among the best choice for garment manufacturers since years as one of the old surveys of StitchWorld (technology magazine of Apparel Resources) found that Odisha is the best place to put up a new factory. In recent two to three years, Kitex Garments Limited announced to invest Rs. 177 crore in the state; Page Industries came up with a similar plan to invest Rs. 120 crore; Texport Industries was also supposed to invest Rs. 75 crore. Wild Lotus Fashion and few other companies also announced some investment in Odisha.
But so far only Shahi Exports and Aditya Birla Fashion & Retail Ltd (ABFRL) have units there. Even the second unit of Shahi Exports, which was supposed to start, is now on hold. Having more than around 1,200 machines there, Shahi could not start its second unit so far despite the fact that hiring of midlevel staff for the same was also done.
As per sources, delay and no clarity on subsidy, satisfactory approach of local workers are two main reasons that the companies are not very enthusiastic to start operations here. As there are reports that Shahi Exports has laid off around 50 mid-level professionals including 13 management trainees and production departments, from its exiting unit, hence there are fewer chances that it will start its second unit in the near future. In between, the state has also increased the minimum wage also which was opposed by the industry.
“Even before COVID-19, companies did not start their projects and now when they are consolidating, there are no chances that these projects will start as per the planning,” shared a well-placed industry professional who was involved in such a project related to Odisha on the condition of anonymity.
Sanjeev Chopra, Principal Secretary of industries department of the state who was instrumental to push companies to invest in Odisha, did not reply to AR’s mail in this regard.
Other hubs are also slow starters
Not only these three hubs, but even few other projects in other states are also on hold and these were also announced long back. For example, one-and-a-half years ago, Arvind Ltd. announced the investment of Rs. 4,000 crore in Chittoor district of Andhra Pradesh. One of the senior most officers of the company confirmed that this project is on hold for at least 6 months.
On one side, it is interesting to see that in the recent development, especially in the light of migrant workers coming back to their homes, Uttar Pradesh has taken a lead as State Government is aggressively working to promote the apparel manufacturing industry. In Noida, Yamuna Expressway Industrial Development Authority (YEIDA) started going through the proposals of applicants interested in setting up shops at the apparel park cluster (Mega Apparel Park at Sector-29 near Yamuna Expressway). Apparel exporters are getting allotment of land now.
Lalit Thukral, President, Noida Apparel Export Cluster (NAEC) told AR, “At least a company from Noida or even from Uttar Pradesh will not go to any other hub as now garment industry is the top priority of the Government.” He further added that even companies from outside Uttar Pradesh are welcome in this apparel park and they will get all facilities as well as skilled labour too.”
Apparel industry demands a lot of flexibility at every level and the way things are changing at the international level, be it international trade relation between major consuming market US and number one exporting country China or labour availability in India’s various hubs, things are not predictable, so coming years will be very crucial for these hubs. Due to various challenges, companies are under pressure, and so is the State Government. So, both need to support each other and respond quickly. Only that will be a win-win situation for all.
