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Talking Point | March 2018

Challenges in 2017, signs of better times now: Aras

GV Aras is the Director of Textile Engineering Group/A.T.E Group, the biggest textile machinery supplier across the textile value chain in India and has in all over 30 years of experience in textile and textile engineering industry. He has been with A.T.E. since more than 25 years. He joined A.T.E. in 1981 as a Junior Sales and Service Engineer and rose to attain the position of Director - Textile Engineering Group (TEG) of A.T.E. In an exclusive interview with Samuel Joseph, Editor of the Indian Textile Journal, he speaks on the investment climate and textile industry’s performance and vision including that of the A.T.E. Group.

What are your comments on the Budget 2018-19?

This Budget, announced by the Finance Minister, although it focused on agriculture and infrastructure, still the textile industry is not totally disappointed. Mainly because textile industry got a higher allocation of Rs 7,148 crore compared to roughly Rs 6,000 crore last year. In that, the ATUFS outlay is about Rs 2,300 crore compared to Rs 2,013 crore last year. It’s really good that we have got more funding for the modernisation of the textile industry.

In addition, a lot of steps have been taken for employment generation. In this, our apparel industry will get highly benefited. In this Budget, MSMEs are also greatly benefited, and this will directly benefit all those MSMEs in textile industry.

Particularly, there are two important announcements. One is the lowering of the corporate tax for units with turnover under Rs 250 crore to 25 per cent from 30 per cent. This will benefit a lot of units in textile and garment industries. There were hints that there will be policy on NPAs for corporate sector, which will bring down the pressure and give relief in this issue.

There were also encouraging announcements for improving the gender ratio in employment, which will be of great benefit to textile industry since many women find jobs in textile industry, especially the garment sector. In all, this is a good Budget for the textile industry, nothing negative in any aspect. One aspect which may be of concern is the decision on MSP, which is likely to raise the price of raw materials, especially cotton. This will need a close watch if raw material price goes up and how it will negatively impact the value chain.

How were the investments in 2017 in textile industry? What is your prognosis for 2018?

The year 2017 was one of the most challenging year for the textile industry. In November 2016, following demonetisation, the medium and small sectors were affected very badly. The after-effects of the hit took nearly six months for the industry to stage a comeback and stabilise. By that time, GST came and dealt another blow, though temporarily.

The organised sector could tide over the crisis, but the medium and small sectors were severely hit, since majority of business was done in cash. Demonetisation dried up the demand for these sectors from rural areas and tier-2 and tier-3 cities. Demand was also subdued in 2017, which affected the production and sales figures of many companies. The first three quarters of 2017 were really bad, but things started looking up in the last quarter, beginning October 2017. Now, if you see 2018, the first quarter has shown good improvement over last year. Demand has started picking up and the financial results of most of the companies are showing better figures compared to last year. Profitability is showing signs of returning after a longer gap. I feel that 2018 will definitely be a better year for the textile industry.

How was A.T.E. Group’s performance in 2017?

The A.T.E. Group also had a lot of challenges in 2017. Since our user industry, especially from the medium and small sectors, was in disarray, our orders were also affected. But we were able to execute the orders from the corporate sector. There was some cash problem, but we managed it in time. Overall, against the challenging environment, I should say the A.T.E. Group did quite well. Because we are diversified across the value chain, from spinning to finishing, and technical textiles plus utilities. In spinning and processing projects, we did very well. Though new orders were affected in the first two quarters, now we see the investment cycle picking. We see a huge in modernisation of processing and weaving and particularly, there is surge in orders of processing.

A.T.E. Group has almost consolidated its position. But are there any specific plans for 2018 and beyond?

Last three years, we were consciously in a mode of diversification and consolidation. We also expanded. In new areas, we entered carpet making technologies and completed the circle. We also ventured into utilities. We have filled the gaps in value chain and expanded phenomenally. Now, we want to focus on our strength, that is offering end-to-end solution in all the fields we have excelled and made a name.

We have recently added a new principal and products. It’s Godrej Consoveyo, a manufacturer of storage automation and retrieval products. These are all very much required for the textile industry. It is the ultimate in automation for the textile industry, which is the need of the hour. This is the area in which many of the big players have started investing. From packaging to storage and retrieval, everything is automated by these systems.

We will be promoting this new concept to the modernising textile industry. Industry 4.0 is at its zenith in Europe and India is not far behind. The smart factory’s time has come and it includes automation, digitisation, Internet of Things, which are meant to make the factory highly quality-oriented. We have also taken the task of rendering the latest services to our customers and make the industry more efficient and keep abreast of latest movements like remote monitoring, etc.

In automation, we are helping our customers having old machines upgrade them with retrofitting. By doing this, customers gain at least 25 per cent more production and quality is enhanced. There is a huge gap in this area. Besides, our new areas include solar, waste water management, smart solutions. Today A.T.E. Group has everything under one window – solutions for the entire value chain in textile industry. Besides, supplying all the equipment for any textile project, we also take care of the after-sales service. This is our strength and in 2018, we will focus on these aspects.

Many State Governments have been talking about textile parks and ambitious packages. Have these shown any results from your point of view? What are your suggestions to promote the textile industry?

Every State has a textile policy. You name them they are there – Gujarat, Andhra Pradesh, Karnataka, Maharashtra, North-Eastern States. But taking into account all these, Gujarat is the one, which has made headway in this. Gujarat has supported the industry from land acquisition to final setting up and launching production. In Maharashtra, one can see a lot of investments coming up in Vidarbha. But now States are competing with one another and so it is too early to talk about successes. One has to wait and watch. Telangana has come out with a good textile policy. But the major bottleneck, the textile industry feels is the lack of proper infrastructure. In addition, though policies of remote States may be attractive, but the industry is reluctant to take up projects since setting up in a remote area is considered risky. One discouraging factor is the land cost, which if high, then people will not go. Secondly, India is lacking in major capacity of apparels. For example, China’s major plank of growth is apparels. Same is now with Bangladesh and Vietnam.

In denim and home textiles, we have done very well, but in apparels, we have lagged far behind. There are two areas, which need immediate actions if India wants to corner more share in export. One is apparel front needs to be strengthened. Another is the synthetics, in which India is weak. In apparel, we need friendly labour policies. There are big companies, which are doing well like Shahi Exports. It is sheer scale of production. If $1 billion is invested in a big-capacity garment unit, it can create huge employment. In States like Jharkhand, Bihar and Odisha, the industrial ambiance is like in Bangladesh with the labour cost very low. If these people in these States are “skilled” by training, big textile parks can be set up to the States advantage. For example, a Brandix, a great name in success in Sri Lanka has repeated the success story in Andhra Pradesh.

How do you think Indian textile industry is placed now?

India’s spinning is already well placed. Weaving is in the process of getting modern. Rapier is in in a big way and as the fabrics available in India is of great quality, the processing demand is also going up. Apart from expansion a lot of new process houses are coming up now. India is going up firmly on the value chain. Having established itself in yarn, we are strengthening the grey fabrics and finishing front. In yarn export, we have scaled new heights. But compared to other countries like China, Bangladesh and Vietnam, India has missed the bus. After China vacated some space, we were not prepared. We have not organised and burdened with infrastructure bottlenecks. Of course, Bangladesh and Vietnam were quick to fill the gap. India has to put additional work to catch the bus.

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