Cotton has clothed the world, traditionally. Though India is the biggest grower of the crop, the hardships of cultivating the water-intensive plant in a world where climate change makes agriculture more unpredictable have made man-made fibres (MMFs) a viable alternative raw material to make clothes.
With a ratio of 72% to 28%, MMFs today surpass natural fibres such as cotton in global textile fibre consumption, says the Ministry of Textile. Its share in the domestic textile and apparel (T&A) industry is about 30% compared with cotton’s 60%. Experts expect these numbers to rise as synthetic fibres continue to gain popularity over cotton and other natural fibres.
The MMF industry has already seen impressive growth over the past decade. The global synthetic fibres market size was $69.8 billion in 2022, and is expected to hit $118.7 billion by 2032, growing at a CAGR of 5.5% from 2023 to 2032, according to Precedence Research. Over the last decade, various industry reports have estimated segment’s growth at a CAGR of 4-5%.
The demand for MMFs is expected to be catalysed by reasons such as limitations of cotton to meet the growing demand for fibre, increasing environmental concerns, and limitations in product and cultivation innovation with cotton.
According to PCI Fibres, a consultancy specialising in fibres and textiles, the global consumption of polyester (a type of MMF) is expected to be 62 million tonnes (mt) in 2023 — more than double that of cotton’s 27 mt. The gap is expected to rise by three times by 2030. MMFs already dominate the global trade with a 59% share in yarn, 62% in fabric, 48% in apparel and 58% in technical textiles. Production of man-made fibres in India grew from 1.35 million tonnes (mt) in FY2016 to 2.4 mt in FY2021. Global production is about 88 mt.
This is where an opportunity is staring at the face for India, the second-largest producer of MMFs, after China. With the government aiming to export $1 trillion worth of goods by 2030, experts say the country should focus more on its strengths to fuel this growth. They point out that India has not been able to tap the export market despite being the sixth-largest exporter of MMF textiles and a major player in textiles. India’s strength “In 2022-23, India was the sixth-largest exporter of MMF textiles globally. It is also a major stakeholder in the global T&A industry,” says Rakesh Mehra, Chairman, the Confederation of Indian Textile Industry (CITI). But the country has not aligned its capabilities according to global demand. “It will have to work towards increasing its manufacturing base of MMF-based T&A products.”
According to Mumbai-based trade promotion organisation World Trade Centre (WTC), MMF textile exports are valued at $6 billion, constituting 16% of the country’s textile exports. Made from synthetic materials, MMFs are in great demand to make fabrics and blended fabrics for readymade garments, home textiles and industrial textiles. According to UN Comtrade data, out of the top 10 globally traded apparel categories, trousers, sweaters, and dresses are the major MMF-based categories with 38%, 41% and 69% share, respectively.
MMFs are mainly of two types — synthetic and cellulosic. Synthetic fibres include polyester, acrylic and polypropylene. Cellulosic fibres are viscose fibre, modal, etc. India ranks second in synthetic fibre manufacturing. The domestic MMF industry is primarily composed of two key components: polyester and viscose, which together make up approximately 94% of the industry’s volume. Polyester represents around 77.5%. The Synthetic & Rayon Textiles Export Promotion Council (SRTEPC) agrees that India’s MMF textile industry has export potential in the USA, Vietnam, Bangladesh, Brazil, the UAE and Turkey. The government’s trade promotion agency, Invest India, says the largest share of MMF textile exports in FY 2021-22 went to the USA (27%), followed by the EU (18%), Bangladesh (12%) and the UAE (6%).
“India’s domestic market itself offers huge opportunities for,” says Vikas Singh Chauhan, Director of Home Textile Exporters Welfare Association (HEWA). “Export is equally lucrative. All we need to do is to scale-up in the value-added segment. It is still largely untapped.” Economies of scale Experts say Indian players can seize a lucrative business opportunity here if they can address certain issues.
The domestic MMF sector lacks economies of scale and this directly impacts cost competitiveness, says Rakesh Mehra, Chairman of the Confederation of Indian Textile Industry (CITI). Issues such as inverted duty structure, lack of technical know-how and a huge dependence on imported machines for high-end products are the bottlenecks for the industry, he adds.
The country has a substantial supply of cotton and polyester and a large pool of skilled labour for cost-effective manufacturing. Even for raw materials, there is some degree of self-reliance. However, these have not been harnessed to dominate the export market.
The demand for MMFs is expected to be catalysed by reasons such as limitations of cotton to meet growing demand for fibre, increasing environmental concerns, and limitations in product and cultivation innovation with cotton.
Industry observers point out that China’s capabilities are incomparable in these areas. It was able to steal a lead by setting up an extensive manufacturing infrastructure. Chinese suppliers are known to deliver orders faster and in large volumes. They are also known to offer better discounts than Indian sellers. HEWA’s Chauhan, also the director of Skier Export and Import, says we are failing to capitalise on our strengths. Recalling his experience from a recent business trip to the US, he says international buyers are keen to buy from India. “We are not prepared for the volume game. We also need to show our strength in economies of scale as they are volume buyers. Our MMF sector is still in a nascent stage. It needs to up its focus on R&D, too,” adds the exporter who extensively uses MMFs as raw materials for home textile products.
Home textiles make up 18% of India’s $44-billion textile & apparel exports. Regulatory pangs The primary regulatory issue holding the MMF segment back is the taxation system, say stakeholders. Man-made textiles attract a differential GST (18% for fibre, 12% for yarn and 5% for fabric), while cotton textiles attract a uniform 5% across the value chain. This makes the tax rate on raw materials higher than the rate on finished products. Industry stakeholders say the government is working to rectify the inverted duty structure in MMFs. The segment hits a big barrier in sustainability norms, too. As MMFs are synthetic and non-biodegradable, they take a long time to decompose. There are global environmental standards for such fibres. China has been able to address this issue better because of easier access to capital to create the necessary infrastructure, say experts. For example, Chinese textile companies have better wastewater treatment and recycling systems, reducing water consumption and pollution. They fare better on effluent treatment plants as well. For energy efficiency, India’s neighbour has made huge investments in machinery and processes, resulting in lower energy consumption and reduced greenhouse gas emissions.
These make Chinese MMF products more cost-effective. Besides, the global market tilts towards products made in an eco-friendly manner; Indian players are weaker on this front. China has implemented stricter regulations on the use of hazardous chemicals, reducing the environmental impact and potential health hazards. It scores better on aspects like sustainable sourcing, green technology adoption and compliance with global sustainability standards.
Industry observers point out that China’s capabilities are incomparable in MMF. It was able to steal a lead by setting up an extensive manufacturing infrastructure.
Sanjay K Jain, Chairman of ICC National Textiles Committee and MD of TT Ltd, says the problem is that we still don’t have a relatively good infrastructure to process MMFs, except for Surat, which could be defined as an MMF cluster. “In other clusters, like in Tirupur, we still predominantly do cotton. We need to develop efficient processing capabilities in man-made fibres.”
S N Modani, the Managing Director & CEO of Sangam India Ltd, wants the government to ensure the availability of manmade fibres at internationally competitive prices. He adds that big suppliers of raw materials need to provide raw materials at international parity. Another suggestion he has is to make power costs competitive with other nations. Modani, also the Chairman of the Rajasthan Textile Mills Association, is of the view that the only material which has to be imported should be against advance licenses so that cheaper inflow of imports is curbed as these hurt domestic industry.
Need for innovation
India has 2.5 million power looms, most of which are small-scale units. These operators are unaware or have poor knowledge of the latest processes that can improve quality and, consequently, bring in higher revenues. Experts say the focus should be on producing cutting-edge, colour-rich, durable products with excellent “hand feel” and technical properties.
They highlight India has room for improvement in producing specialty fibres, an untapped segment for a majority of MMF players. Ajay Ranka, CMD-Zydex Industries, says most companies producing high-quality specialty fibres are in Taiwan, Europe, Korea, China and Japan. These companies closely guard the know-how around making speciality fibres. “India will have to focus on its ability to innovate and duplicate and create different kinds of finishes, hollow fibres, and hydrophilic techniques to manage this feel, comfort and cost factors. Once we do that, we should be able to export aggressively.”
Experts reiterate that India has traditionally concentrated on cotton textiles, though the global demand for mill fibre is shifting towards MMF. Even within the traditional strength, the country is facing challenges.
“In 2022, India had managed to capture only 4% of the global trade in apparel exports. Other low-cost countries such as Bangladesh have captured 12%,” says Rahul Ahluwalia, Director at New Delhi-based Foundation for Economic Development.
While the Indian government has taken steps such as the PM Mitra and a PLI scheme to boost manufacturing in this segment, MMF players say there has to be a sharper focus on targeting export markets. They want the government to bring in suitable reforms towards this end.
Policy support in labour, power and capital costs will increase exports and create employment as well, they say.
Read More at https://economictimes.indiatimes.com/small-biz/trade/exports/insights/man-made-fibre-industry-is-thriving-in-india-but-why-isnt-it-ready-to-challenge-china/articleshow/104932083.cms
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