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Why TN’s Golden Goose Isn’t Laying Eggs
Context:
Tamil Nadu’s textile sector, once a key economic driver, is currently facing challenges due to labour shortages, competition from other states, and inefficiencies in its traditional cluster model, threatening its sustainability.
Background
- Modi’s Call to Textile Entrepreneurs (2010): Narendra Modi, then CM of Gujarat, invited Tamil Nadu textile entrepreneurs to set up spinning units in Gujarat, promising better electricity supply and lower transport costs.
- Tamil Nadu’s Electricity Crisis (2010): The state suffered from a severe power crisis, but the textile industry didn’t relocate due to a strong local labor force and an efficient production ecosystem.
Challenges Facing Tamil Nadu’s Textile Sector
- Severe Labour Shortage: Migrant workers form 70% of the labour force, but there’s an ongoing shortage (30%), worsened during high-order inflows.
- Rising Wages: Labor wages have increased by 30% over the last 2-3 years. Minimum wages for stitching in Tamil Nadu are ₹510 per shift, but mills pay ₹800-900, while wages in Telangana are ₹500-600.
- Dependence on Migrant Workers: High attrition rates and low worker loyalty. Migrant workers increasingly look for jobs closer to home in states like Madhya Pradesh and Odisha.
Impact on Operations
- Outsourcing Due to Labor Shortage: Companies like NC John Garments outsourced work to meet order demands due to labour shortages, affecting profit margins.
- Relocation of Units: Many companies are moving operations to states like Telangana, Madhya Pradesh, and Odisha, attracted by lower costs and better incentives.
Declining Efficiency of the Cluster Model
- Increased Competition: Tamil Nadu’s cluster model of specialised small units has become less competitive due to rising competition from Bangladesh and Vietnam.
- Limited Expansion within the State: Many textile units have shut down, and large units have paused expansion plans within Tamil Nadu. Expanding outside the state offers better prospects.
Rich Legacy of Tamil Nadu’s Textile Sector
- Historic Textile Hub: Tamil Nadu has a century-old textile industry, starting with Lakshmi Mills in 1910.
- Large Market Share: The state contributes 46% of India’s spinning capacity, 70% of knitting capacity, and accounts for 20% of the country’s apparel exports.
- Renewable Energy Investments: Tamil Nadu’s textile industry was an early investor in wind and solar energy.
Dependency on Migrant Workers
- Shift from Local to Migrant Labor: As education standards improved, local youth shifted to service sector jobs, leaving a vacuum in blue-collar work in textiles.
- Migrant Workers’ Challenges: Migrant workers from Bihar, Odisha, Uttar Pradesh, and other states are now essential to the sector. However, they have become less disciplined, with high attrition rates and decreased productivity.
Automation’s Limited Scope
- Automation in Spinning Mills: Automation has helped reduce labor needs in some segments like spinning (e.g., air-jet spinning machines), but sectors like stitching still heavily rely on manual labor.
- Limited Technological Options: While some spinning mills can automate, segments like stitching require human intervention, limiting the potential for full automation.
Integrated Textile Units
- Rising Preference for Integration: Large buyers are moving towards fully integrated units (spinning, dyeing, weaving, stitching) to ensure better quality and global competitiveness.
- Struggle for Small Units: The cluster model of small units in Tamil Nadu faces challenges in scaling up or converting to integrated units due to limited financial resources.
Shift in Investment
- Expansion Outside Tamil Nadu: Companies like Shahi Exports, Gokuldas Exports, and Kitex have set up units in states like Madhya Pradesh, Telangana, and Odisha.
- Incentives in Other States: Attractive incentives and lower costs in states like Telangana and Madhya Pradesh are driving entrepreneurs to relocate.
Future of Tamil Nadu’s Textile Clusters
- Clustering Model’s Decline: The long-standing cluster model in Tamil Nadu may soon become obsolete unless modernisation and relevant interventions occur.
- Government’s Role: The Tamil Nadu government needs to intervene to support the sector to maintain its competitiveness and help achieve the state’s economic goals, such as becoming a trillion-dollar economy by 2030.
Conclusion:
Despite a rich legacy, Tamil Nadu’s textile sector faces labor, cost, and global competition challenges. To survive and thrive, the state must address these issues through government support, automation where possible, and labour management.