State Of The Economy 2014

Preserving the fabric

Bhilwara’s synthetic fabric units are coping with the slowdown by reinventing themselves

It’s not a very generous thought, but Sachin Rathi is openly thankful that 1,500 of the 11,000 weaving units in his textile cluster have either sold out or shut shop in the past two years due to the slowdown. “It means better business for the rest of us. The 15% reduction in weaving capacity meant those remaining have gotten more orders. And that means we’ve been getting good business these past few months,” says the textile processor. At his shopfloor, workers are engaged in a seamless routine of dyeing, finishing and processing hundreds of metre of polyester viscose (PV) suiting on big, loud machines. The dimly-lit plant appears rusty and decades older than its actual 12 years. “Chemicals, heat, and water interact at all times in such factories and lead to this decaying look of the walls and shed,” says Rathi, who started the ₹30-crore Puja Spintex in 2002. Every year, his fabric processing unit turns out 3.6 million metre of synthetic fibre, doing job work for 120 clients from in and around Bhilwara in southern Rajasthan, nearly 600 km from Delhi. 

Bhilwara is the world’s largest PV suiting cluster, rolling out 70 million metre of pure polyester and polyester viscose every year. It has 10 industrial areas developed by Rajasthan State Industrial Development and Investment Corporation (Riico) and large units outside these areas. The district has 671 registered units of a total of 15,734 industrial units. Of these, 75 are large units, with a more than ₹10 crore investment in plant and machinery. Companies such as Hindustan Zinc and Jindal Saw have set up base here. But it is textile that is the mainstay of the region.

Three stages of textile manufacture are currently carried out in the region — spinning, weaving and processing. Simply put, spinning is turning cotton into yarn, weaving turns yarn into cloth, and processing entails finishing of cloth by stentering and dyeing etc. The fourth stage in a cloth’s life, garmenting or stitching, happens outside the city limits. The 440-odd units in Bhilwara mostly churn out PV suiting and uniform cloth. For the denim and cotton-wearing metropolitan generation, this ‘Only Vimal’ fabric may have gone out of fashion a couple of generations earlier, but demand for PV is still going strong in rural and semi-urban India. It’s not hard to understand why: a metre of PV costs only around ₹80 compared with over ₹150 for cotton. Also, PV fabric wrinkles less and lasts longer.

A few km from Rathi’s facility, the 67-year-old RL Naulakha calls for his BMW to give us a tour of his 200,000 sq m spinning facility. Naulakha is an industry veteran who has spent over 34 years in this cluster. His company, Nitin Spinners, has over 77,000 spindles and clocked a turnover of ₹446 crore last year. About 95% of the 25,000 tonne of cotton yarn and thread the company produces every year is exported to countries such as Poland, China and USA. At the humongous spinning line, advanced automatic machines turn raw cotton into yarn, with robotic arms running from one end of the spinning machine to the other like ropeway trollies and then travelling back from the other side. “We compete with countries such as China, which have the best facilities. So we must also have world-class factories,” he says. He doesn’t have to wait too long before the reason for his optimism becomes clear — there’s a prospective overseas customer waiting and Naulakha excuses himself to attend to the visitor. Meanwhile, his CFO, P Maheshwari, informs us that “Chinese interest in spinning and, resultantly, capacity, is gradually declining as they focus more and more on finished fabrics.” So, one more reason for spinners in India to increase their capacity here.

Built to last

There are scores of names on the wooden board listing past presidents of the Mewar Chamber of Commerce & Industry, but the board next to it has just one name: SP Nathany. Secretary of the chamber since 1966, Nathany has been in Bhilwara since 1962, when he came here to handle his family’s mica business. That folded up in a couple of years as industrial usage of the mineral declined and Nathany instead took charge of overseeing local industry’s interests. He’s been a constant witness to the changes in the region over the past half century. “It is a mature cluster. We are saturated in terms of land and land costs are rising,” says the 80-year-old Nathany. Indeed, Riico’s industrial areas have very few vacant plots. In any case, these can accommodate only small and medium units; a large unit, which requires hundreds of acres, has to look outside.

Right now, the most sought-after Riico area in Bhilwara is the Hamirgarh Growth Centre. KK Kothari, regional manager, Riico, Bhilwara, says about 50 plots, ranging from 1 acre to 20 acres, are vacant and will soon be auctioned. “The prevailing price is ₹510 per sq m but the auction rate is expected to be ₹1,500 per sq m,” he adds. But this may not be sufficient if more SMEs look to expand or add new plants. “We have acquired 350 hectare at Sonyani in Chittor district, only 15 km from here. Its environmental clearance is still pending with the state government. That will bring some relief,” assures Kothari. But going forward, it may not be easy to get more land. With the new land acquisition law in place, developed industrial land will only become costlier. 

Slaking the thirst

It is a desert state, so it shouldn’t be surprising if water is a little short in supply. At Bhilwara, ‘little’ is an understatement. “Water is a limiting factor and the district is already in a dark zone,” says Nathany. Groundwater levels are dangerously low and water pollution is also a major concern. Textile is a water-intensive industry and factories with their private tubewells consume 30 million litres of water every day. By 2021, this demand is expected to rise to 52.5 million litres a day. At Nitin Spinners, Naulakha says humidification of cotton takes up 500,000-700,000 litre of water every day and this will only increase after capacity expansion. The textile processors use even more water and, worse, discharge polluted water. So much so, that the Pollution Control Board has stopped issuing permits for processing units in this water-scarce cluster — there are now only 18 such companies left in Bhilwara. Rathi recalls that when he started off in 2002, pollution regulation wasn’t so stringent and he didn’t feel it imperative to put up a water treatment facility. “But soon I had to. Today we reuse 70% of the water in the plant,” he says.

What’s Riico doing about the water problem? “It might come from Chambal,” says Kothari, referring to the ₹1,363-crore plan to bring water to Bhilwara from the Chambal River in Kota. Pipeline laying work has already started at the outskirts of the city. But Nathany doesn’t buy this argument. “Every town and village on the way will take its share from Chambal water and whatever will reach here will be consumed as drinking water. Industry will not get a drop of it,” he declares.        

If almost everyone complains about shortage of water, they are equally unanimous in praising the power situation. In other states and industrial clusters, this would be the topmost problem but at Bhilwara, it remains the topmost advantage. Some units keep generators and captive power for backup, but mostly all depend on grid power and outages are infrequent. “I have a power backup here for emergency but power supply is not bad,” says Beswal, whose weaving machines keep running almost 24 hours a day.  

Changing fabric

Remember what we said about urban customers preferring denim and cotton? Bhilwara’s textile producers are aware of that trend — as they are conscious that fashions usually travel from the cities to the hinterland. So, even though the region has conventionally never been a cotton or denim cloth producing textile cluster, it is slowly adapting to changes in customer demand.

PM Beswal is a case in point. The 63-year-old energetic entrepreneur and PhD in management started his company, Ranjan Fabrics, in 1988 and, like everyone around, produced PV cloth and polyester. About a year and a half ago, the company added cotton weaving to its portfolio and today has five units weaving 100% cotton, cotton-lycra cloth, PV cloth, PV cloth for export and 100% polyester. Last year, he sold ₹100 crore worth of such cloth.

The switch is a difficult but necessary transition, says Beswal. It’s not just about adding new plants and machinery. “There are no cotton processors in Bhilwara. We have to get the woven fabric processed from Ahmedabad,” he points out. Setting up a cotton processing plant requires at least ₹100 crore investment and most existing processors (of PV) here are SMEs without such financial muscle. And the government isn’t allowing new processors to set up shop in water-scarce Bhilwara. But even after getting the processing done outside, weaving cotton is not a bad idea. “If profit on PV is ₹5 per metre, on cotton cloth, it is ₹10 per metre,” says Beswal, adding that his turnover grew ₹20 crore last year on the back of cotton. 

Denim could be a similar story, given higher margins and increasing demand across India, but it’s still even more in its infancy than cotton. So far, only two companies in Bhilwara have denim lines — Kanchan and Sangam. Rathi explains why. “Setting up a denim line means investing at least ₹40 crore, and you need at least two for it to be viable.”

Bullish sentiment

It may be a while before Bhilwara becomes a destination for denim and cotton, but businesses in the area are largely bullish and they are investing for the future. “Bhilwara has always had the latest technology. We have taken good advantage of the government’s Technology Upgradation Fund Scheme,” says Nathany.

At Nitin Spinners, CFO Maheshwari points out that capacity has not been increased in the past three years. “Turnover increased from ₹302 crore in FY10 to ₹446 crore in FY13. But it was mostly due to increase in price and value addition within existing categories, not due to any increase in capacity and volumes.” Now, work is on inside the factory to build a new unit and Naulakha is convinced the ₹286 crore investment will be worth it. “Profitability is okay now. But if we don’t expand, there will be pressure on it. We are already 100% utilised.” In the next two years, the company wants to double capacity and reach a turnover of ₹900 crore. 

Beswal, too, has invested in new machines, albeit for the newer cotton lines. As we walk through his plant, he points out the second-hand Sulzers (weaving machines from Switzerland) as well as the new Rapiers from Germany. Now, he’s building an entirely new line for cotton, investing ₹13 crore on advanced Airjet technology weaving machines on land he has next to the existing plant.

Despite the optimism, Bhilwara businessmen have their share of worries as well. Cost pressures, for one. “We have to buy cotton at international prices, labour costs have increased, land costs have also risen, and machine prices are the same for everybody. In such a situation, we have to be competitive and control costs,” says Naulakha, comparing the Indian textiles industry with others in the world.

Then there’s the government. “Our government taxes texturised yarn at 5%. The same can be brought here from Silvassa at 0%,” says an irate Nathany. “The Centre had announced an Integrated Textile Park and Textile Mega Cluster for Bhilwara three years ago. The participating units would have gotten subsidy. But it had to be implemented by the state and it doesn’t have any time for industry. Even after 10-12 extensions, when the state government didn’t act, the projects died.”

There’s also positive government action, though. The Mallavaram-Bhilwara gas pipeline is on the cards; the 2,000 km long pipeline will bring gas from the west Godavari district in Andhra Pradesh to Rajasthan. If that happens, the mineral industry here will explode. “Currently all the quartz and felspar is being sent out from here. Once gas is here, we see a great future for the ceramic industry here," says Nathany. 

For a mature industrial cluster, Bhilwara certainly seems sprightly. “Despite problems, our industries continue to be healthy. The best way to gauge that is to check the non-performing assets of banks here,” suggests Beswal.. By that token, Bhilwara certainly passes. The Mewar Chamber estimates banks’ NPAs in the region at just 0.6%.