Cotton textiles in growth mode

BARAMATI: While the country''s cotton yarn manufacturers may not be too clued up on the effects of the dismantling of quotas under the multi fibre arrangement (MFA) Act, what they do know is that the domestic market is booming. Hence, "huge numbers" of such mills which were export oriented units have gone and de-bonded themselves during the last year.
"The opportunities in the domestic market have increased.It is a very quality conscious market and with the rupee strengthening against the dollar, the arbitrage offered by the domestic market, of 5-7 per cent, is better than the overseas," Sitaram Parthasarathy, director, Spentex Industries Ltd (SIL) said. SIL exports about 40 per cent of its production.
SIL, set up in 1991 by the RPG group in technical collaboration with a Swiss company, was taken over by the Delhi-based CLC Group, in January 04. A CLC group company, CLC Global, took over Cimmco Spinners, based in Solapur, from the Birlas and is currently in the process of expanding capacities at both locations.
The loss-making SIL is now set to present a clean balance sheet, following the proposed merger of CLC Corporation into it.
"We are in the process of restructuring the group. The merger of CLC Corporation with SIL is now before the High Courts in Delhi and Mumbai and once that is cleared, there will be just two companies, CLC Global and SIL," Mukund Choudhary, MD, SIL, said.
Mr Choudhary told reporters at the Baramati plant that they plan to invest in capacity expansion at both locations, Baramati and Solapur. The Baramati plant, whose current capacity is 29,232 spindles, will see the addition of 40,000 new spindles. A detailed report on the Rs. 90 crore investment at the 17 acre facility will be ready in the next fortnight, he added.
The expansion at Solapur will be done in collaboration with a large, integrated textile and garment manufacturer. Cimmco, which currently has 26,000 spindles, the plan is to add another 50,000. This additional capacity will be paid for by the textile company, who will buy back the yarn for a five year period, the investment being adjusted against the yarn.
"We will invest Rs. 24 crore in Cimmco, for the land and building. They will invest in the capacity expansion and buy back for a fixed period, recovering their investment in the five years. The addition of 50,000 spindles would have cost us about Rs. 150 crore; now, we will get that capacity for Rs. 24 crore," Mr Choudhary explained. This capacity will be commissioned by October 05.
While the domestic market is booming, Mr Parthasarathy pointed to industry demands which would make the sector grow much faster. He referred to the policy in Tamil Nadu which allows hiring labour on five year contracts.
The other issue which the sector faces are the "primitive" harvesting and processing methods practised. This leads to contamination in the bales of cotton bought by factories, adding a cost to the process since people have to be employed to de-contaminate the cotton. He pointed to the bales of cotton imported from the Cameroons, in Africa, which have no contamination.