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TEXTILE EXPORTERS HAVE just about two years to get in shape before the quota regime goes, and the deficiencies in the crucial areas of manufacture and supply chain management that threaten their competitiveness vis-a-vis South/South-East Asian rivals are too many to be glossed over. The textile manufacturing-export sector is still to come to grips with issues of raw materials, key inputs such as power and labour, cost of investment in technology, and delivery infrastructure (ports). Above all, policies continue to be ad hoc, causing distortions in the industry. All these deficiencies raise significantly the textile sector's transaction cost, lowering its competitiveness compared to those from China, Korea, Indonesia, Pakistan and even Bangladesh and Sri Lanka. More disturbingly, these factors may lead to dumping, and could swamp especially the processed and finished fabric/garmenting sectors once the quantitative restrictions go, post December 2004.

Textile producers/managements are understandably exercised, and especially revealing are the concerns voiced by the cotton Textile Export Promotion Council (Texprocil). India produces a range of cotton varieties but not what the industry requires. The mis-match forces spinners to import. Even finer-count indigenous varieties, such as the DCH-32, have lost their fibre quality/commercial sheen. The intervention by the Technology Mission on Cotton is too inadequate to correct the situation in the short term. The spiralling power cost has proved a problem. At 8.5 cents per unit of electricity, Indian producers are paying double their South-East Asian counterparts. The modern, power-intensive production lines have made electricity cost second only to that of raw material. For exporters, accessing fuel at international costs remains a mirage. State governments are also unwilling to support units going for captive power, fearing a fall in grid demand. The ambivalent government stand on reforming labour laws has dismayed exporting units and this may delay such export-thrust efforts as setting up special export processing zones and apparel parks. Promoters/participants of such zones also expect government support in infrastructure development for a hassle-free production environment — a pre-requisite to competitiveness. Port and Customs delays not just stymie exporters, but also add to the operating cost.

The continued distortions in the duty structure is a grey area which, unaddressed, can dislocate efforts to evolve a consensus among production/processing segments on the crucial bound tariff rate for different product groups. India should be soon ready with its binding tariff agreement as the modalities for negotiations should be in place by March 2003. But the Government is tinkering with `deemed Modvat', which often proves counter-productive, leading to cut-throat competition among exporters. The Government should also find its feet quickly on the issue of hank yarn packing obligation — either remove theobligation or reduce its level. A stiff agenda but one that has to be implemented if India is to remain a textile exporter of significance.

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