Perfect Sourcing

MARKET UPDATE

IS GURGAON A Perfect Garment Cluster?



It is being predicted that the textile sector in India is poised to grow at a CAGR of 8.7% between 2009-23, reaching US$ 226 billion by 2023. Considering the immense potential for growth that exists in this sector, the State government recognises that Haryana, with its strong existing infrastructure for textiles, abundant supply of raw material, skilled labour and strategic location is ideally positioned to benefit from this opportunity. Through an innovative strategy and targeted interventions, the textiles industry in the state can attain strong growth, buoyed by both increased domestic consumption and growth in exports. The Textile Policy of 2017 aims to promote and develop a robust textile industry that generates employment and positions in Haryana. The textile and apparel industry in Haryana exhibits strength across the entire value chain from fibre to fashion.

The state is one of the leading cotton producers in the country with Sirsa, Fatehabad, Bhiwani, Hisar and Jind being the main cotton producing districts. This bounteous availability of raw materials gives Haryana a competitive advantage in the textile sector. The cluster-based approach to industrial development has produced robust textile centres such as Panipat, Gurgaon, Faridabad, Manesar, Hisar and Sonipat. The sector today provides employment to approx. one million people with readymade garments worth US$ 2 billion being exported from the state of Haryana annually.

As per Haryana’s latest textile policy, the Government of Haryana has set objectives which includes attracting investment in the textile sector to the tune of Rs 5,000 Cr, generate 50,000 new jobs in the textile sector, boost textile export with a CAGR of 20% during the policy period and achieve balanced regional growth. The State Government would facilitate the setting up of textile parks exclusively for garmenting units with provision of labour housing and built up sheds(to be provided on lease basis) to facilitate expansion of the garmenting industry in the state.

• Total number of units in Gurgaon- 662
• Macro Units- 223 macro
• Small Units- 422 small
• Medium- 17 medium
• Total Ready Made Garment Exports from Gurgaon in 2013-14- NRupees 8443 lakhs approx.

Gurgaon- The Ultimate Destination for Garment Manufacturing

Gurgaon, located on NH-8 of India’s roadmap has become a prominent location for manufacturing garments. In fact, the hub houses some of the biggest export houses in the country which includes players like Orient Craft, Richa & Company, Knitcraft, Orient Fashion, Modelama Exports, Instyle Exports, Trendsetter, Usha Fab and many more. The Government recently announced the textile policy of Haryana and listed some important objectives that will be met over the next couple of years. The motive is to make Haryana more friendly for industries like textile and apparel as the textile and apparel industry is playing a pivotal role in growth of the Indian economy by way of its momentous contribution to the GDP, industrial output, export earnings and employment generation.

As per records available, there are around 662 units for garment manufacturing, out of which 223 are at macro level, 422 are small and 17 are medium. However, these figures exclude the units that are not registered. In 2013-14, it is estimated that RMG exports from Gurgaon were to the tune of Rs 8,443 lakhs. If the Government during that period was progressive, forward thinking and had implemented whatever was on paper, things would have been different as Gurgaon alone could have left other manufacturing hubs behind in turnover and scale of business. A lot of units moved out of Gurgaon to places like Noida because of constant labour wages and electricity problems.

Gurgaon was supposed to be the model city that would emerge on the outskirts of Delhi to provide all of India with an example of what the future of business and development in India should look like. The rapid growth and development of Gurgaon was initially praised and applauded as it seemed that Gurgaon was creating jobs, developing industry, and attracting significant foreign business investment from major companies like Citibank, Motorola, IBM, Oberoi, Trident and Westin. However, the speed could not match development and all the plans for making Gurgaon an ideal hub for manufacturing have gone awry. As per the officials working on the Haryana cluster, the biggest problem with players in the apparel industry is that they usually do not come from an apparel or textile background; whatever they learn is through the trial and error method. This happens across all age groups. Even though they hire professionals, most of the time they are not able to retain them. Citing an example, Sanjeev Jha, MSME Facilitator, DIC Gurgaon from Ernst & Young, working on a project in Gurgaon said, “If we look at places like Gujarat or study the success model of Ratan Tata’s companies, one would find that people working with them do not want to leave the organisation till they grow old; in fact, they want their children also to join the organisation once they retire.” He also mentioned that lack of professionalism, respect for workers and their concerns has been a big drawback for Gurgaon. To uplift the textile and apparel industry in Haryana the Government of Haryana recently proposed the following measures in its TEXTILE POLICY 2017. To avail of the same the company needs to have a registered office in Gurgaon.

BENEFITS FOR GARMENT INDUSTRY

Fiscal Incentives


1) INTEREST REBATE/SUBSIDY

i. Interest subsidy @ 6% per annum for garments/ made-ups/knitting/ embroidery/ technical textiles and @ 5% per annum for ginning/ cotton spinning/dyeing and processing/ powerloom including shuttle less loom, on term loan for new/expansion/diversification/modernisation projects for 5 years in ‘C’ and ‘D’ category blocks.

ii. Interest subsidy @ 5% per annum for garments/ made-ups/ knitting/ embroidery/ technical textiles and @ 4% per annum for ginning/cotton spinning /dyeing and processing/ powerloom including shuttle less loom, on term loan for new/ expansion/ diversification/modernisation projects for 5 years in ‘A’ and ‘B’ category blocks.

iii. Interest subsidy shall be available to all categories of textile enterprises.

iv. Interest Subsidy shall be provided in addition to interest rebate available under GOI schemes subject to the ceiling of Bank Lending Rate. For the purpose of interest subsidy, the enterprise shall get a term loan from a Financial Institution/ Bank recognised by Reserve Bank of India.

v. All machineries specified in TUFS list would be eligible for benefit of the scheme.

vi. The enterprises which have acquired second hand imported machineries of 10 years vintage and with a residual life of minimum 10 years, duly certified by the competent authority like Chartered Engineer/ Chartered Account, etc., will be considered eligible for support under the scheme with a condition in line of the latest TUF Scheme of Government of India.

vii. Support to second hand imported machineries will be given only after successful operation of the machineries for a six- month period after commissioning by the enterprise.

Employment Generation Subsidy


For capacity building of persons belonging to Haryana (skilled, semi-skilled/unskilled) at an engaged minimum of 50% of total employment, the subsidy will be Rs 36,000/- per year for SC/ Women and Rs 30,000/- per year for General category for 5 years subject to a ceiling of Rs 50 lakh/year/unit in ‘B’, ‘C’ & ‘D’ category blocks and @ Rs 18,000/- per year for SC/ Women and Rs 15,000/- per year for General category for 5 years subject to a ceiling of Rs 25 lakh /year/unit in ‘A’ block. The said incentive will be available to all new/expansion/diversification projects in the textile sector as per the definitions provided in this policy. Additional/new employment for the current financial year shall be determined on the basis of strength of the workforce of the industrial unit as on 31st March of preceding financial year. For claiming Employment Generation Subsidy, the unit has to mandatorily access the Saksham PortaL launched by Director Employment, Haryana for filling up the vacancies and in case of non-availability of such personnel, a certificate has to be obtained from District Employment officer for submitting with the claim.

Freight Assistance


Export oriented units have to bear additional transportation cost which makes their product uncompetitive for export in comparison to the units located in the coastal areas. In order to defray the transportation cost partially, 1% of FoB value or the actual freight cost, whichever is less and maximum up to Rs 20 lakh will be provided to all categories of exporting enterprises located anywhere in the State.

Setting Up Of A Garmenting Park


State Government shall facilitate the setting up of Textile Parks exclusively for Garmenting units with provision of labour housing and built up sheds(to be provided on lease basis) to facilitate expansion of the garmenting industry in the state.

Challenges


The rapid rise and development of Gurgaon has also created issues including inadequate sanitation services, lack of adequate water supply and a lack of oversight to protect the interests of the poor migrant workers who were lured to Gurgaon by promises of jobs and economic opportunity. Due to the fact that the development of Gurgaon was largely left to industrialists and private corporations, there has been minimal oversight or regulation of business and manufacturing practices. In fact, the All India Trade Union Congress claims that the significant foreign industrial investment was the result of an implicit agreement between investors and the government of Haryana that union activity would be suppressed. This has led to an environment in which human rights violations are rampant and the government is complicit in allowing business and manufacturing to continue abusing workers.



With the rising cost of livelihood and industrial growth at a standstill, the garment industry workers of Gurgaon are now moving towards the industrial estates in Rajasthan and even back to their native places like Jharkhand in search of a better livelihood. Such a shift of the workforce has hit the industrial output by around 15%. Small and medium enterprises based in Gurgaon or any other industrial area in Delhi-NCR are not earning because of merging competition and dearth of business for the Indian apparel industry.

Rajasthan-based garment industry units which pay at par with those based in Gurgaon are therefore attracting these workers. Also, livelihood in Gurgaon has become so expensive that savings have become quite tough, while in Rajasthan, with a cheaper livelihood, the industry workers are getting some breathing space.

In Gurgaon, a worker gets around Rs 12 - 15,000 per month, while in Rajasthan, especially in Tapurkura which is 55 kms from Gurgaon, they are paid almost the same. Apart from this, the Rajasthan government is comparatively softer in implementing the rules and regulations related to industries and infrastructural development. Seeing profit margins going, unit owners prefer to rent out their unit and invest money in various portfolios like real estate, bank FD, mutual funds, etc.

A worker can grow only when industry grows. But, in Gurgaon, only HSIIDC employees are growing. With the investments fetching better returns to the unit owners, industry has deviated from the main focus leading to a depleted working environment in the region. There are more than around 300 operational garment units in Gurgaon and the majority of them are in exports. However, the majority of the garment units are stationed in Udyog Vihar in Gurgaon. Not more than 25 units would be operational outside Udyog Vihar. The Gurgaon-based garment manufacturers and exporters generate around Rs 12,000 crore per annum.

Besides this, shortage of electricity is a big problem for manufacturing units as every year a large amount of money goes into diesel cost required to keep the units running in the absence of electricity.

Traffic Snarls- the Main Problem of Gurgaon





(Mohit Aurora, International Marketing Head and Developer Head)


❝ Internet Exports India LLP, a manufacturer and exporter of fashion garments and accessories with its manufacturing unit spread in an area of 40,000 square feet has been in Gurgaon for a long time. While sharing thoughts about Gurgaon as a garment manufacturing hub, Mohit Aurora, International Marketing Head and Developer Head at the company said, “Our company was established in 1997, earlier we were based at New Friends colony. When the factories were taken out of Delhi, we had only two options; moving to Noida or Gurgaon and we chose Gurgaon due to its proximity to the International airport, which helps us to connect with the buyers. Also, at that time Manesar was the upcoming hub.” He also believed that since a major export association like Apparel Export Promotion Council (AEPC) exists in Gurgaon, it adds to the advantages.

❝The Metro has been a big boon for Gurgaon as a lot of people used to face commuting problems earlier, but now it is no more a barrier and people from Delhi, NCR region travel easily,” he said. The company is fully equipped with the latest Japanese and German machines such as sewing, fusing, cutting, threading, over-lock, CAD, embroidery and washing machines with 100% power backup. When asked how he saw Gurgaon developing in the next five years, he said, “Gurgaon has a very cosmopolitan feel to it and the infrastructure is getting better. In the coming times, it will turn out to be a major manufacturing hub.”

He, however, felt that traffic and high labour wages in Gurgaon were becoming an issue of concern. “Labour is expensive here as compared to other places such as Noida, and now that the Government is offering subsidies to set up units in Jharkhand, a lot can change in the times to come,” he asserted. He did not agree that raw material procurement is a big issue with Gurgaon and said, “Most of the raw materials are anyhow sourced from South India; this is the case with most North India based manufacturers hence raw material procurement is not a hassle.”





(Pinki Nawal, Gautam Apparels & Sourcing Pvt. Ltd.)


❝ I do not think that any major problem exists in Gurgaon. Workers who operate on per piece price do not get the price they deserve for the hard work they put in; on the other hand there are workers working on salary basis who remain content and happy. In South India, fabric sourcing is not a problem and any type of fabric can be sourced easily in quick time; however, in North India, In Gurgaon, labour scarcity is becoming an issue of concern and business is getting affected. Inderjit Singh Suri, Singh Exports, Gurgaon Water, electricity, labour availability, high wages, traffic jams are all areas of concern. Long traffic jams decrease efficiency and increase the working hours of every employee. Also, it wastes a lot of crucial time. Sanjay Kohli, KAIRA INC., Gurgaon the scenario is quite different. Post demonetization, there were some payment problems with contractors because they get paid in cash but people who are working with us on salary basis do not pose any problems.

Gurgaon Flooded with IT Industry





(Naveen Gupta, Virender Textiles, Gurgaon)


❝ As far as Gurgaon Udyog Vihar Phase 6 is concerned, it has got better because of the new flyover that has started working. As a result of this, traffic problems have been solved to an extent. In Manesar, the situation will take some time to improve as labour is plentiful, whereas factories are few.

There are a lot of issues that have erupted recently and they might sound small but it creates a uncomfortable situation for buyers coming from all over the world. Banning of slaughter houses has become an issue of concern as buyers while travelling to India are facing dietary problems since they are habitual meat and beef eaters. Such food is no longer available in India they do not want to come to India on a regular basis. In the Hindu religion, a guest is treated as a God and when we cannot serve our guest, how are we going to fetch business from them.

Rajiv Nair, Kanchan International, Gurgaon



In Gurgaon, labour scarcity is becoming an issue of concern and business is getting affected

Inderjit Singh Suri, Singh Exports, Gurgaon



Water, electricity, labour availability, high wages, traffic jams are all areas of concern. Long traffic jams decrease efficiency and increase the working hours of every employee. Also, it wastes a lot of crucial time.

Sanjay Kohli, KAIRA INC., Gurgaon



The problem is not related to Gurgaon as a cluster, but the overall situation of the market is hampering business. Buyers’ do not pay on time, approvals from Government take time, paper work is lengthy and to get it done faster, one has to resort to corruption.

Sangeeta Yadav, SMR Exports, Gurgaon



I will rate Gurgaon better than Delhi and adjoining areas as the pace of business is good here, the problems in terms of getting fabric and accessories is less and we can do business in a better and peaceful manner.

Rahul Gulshan, MHK Exports Pvt. Ltd, Udyog Vihar, Gurgaon