Cotton textile industry is obsessed with many problems. Two main factors which have wrecked die industry are Government’s textile policy and the growth of the power loom sector.
The result was that many cotton mills became inefficient and uneconomic-one-dirt of the cotton mills became sick and was closed down. By 1992 as many as 130 cotton mills were closed down. Following are some of the problems faced by the industry.
(a) Shortage of raw materials-Raw material determines 35 per cent of the total production cost. The country is short of cotton, particularly long- staple cotton which is imported from Pakistan, Kenya, Uganda, Sudan, Egypt, Tanzania, U.S.A. and Peru. It is pity that despite largest area under cotton (26 per cent of the world acreage) the country accounts for only 9 percent of the world output of cotton. Fluctuating prices and uncertainties in the availability of raw material cause low production and sickness to the mills.
(b) Obsolete machinery-In India most of the cotton textile mills are working with old and obsolete machinery. According to one estimate in India over 60 per cent of the spindles are more than 25 years old. The automatic looms account for only 18 per cent of the total number of looms in the country against the world average of 62 per cent and 100 per cent in the United States. Obsolete machinery leads to low output and poor quality of goods as a result of which Indian textile goods are not able to face competition in the international market.
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(c) Power shortage-Textile mills are facing acute shortage of power. Supplies of coal are difficult to obtain and frequent cuts in electricity and load shedding affect the industry badly. This leads to loss of man hours, low production and loss in the mills.
(d) Low productivity of labour-Low productivity is another major problem of cotton textile industry. On an average an Indian factory worker only handles 380 spindles and 2 looms as compared to 1,500-2,000 spindles and 30 looms in Japan. If the productivity of an American worker is taken as 100, the corresponding figure for U.K. is 51 and for India only 13. Also industrial relations are not very good in the country. Strikes, layoffs, retrenchments are the common features of many cotton mills in the country.
(e) Competition in foreign market-The Indian cotton textile goods are facing stiff competition in foreign markets from Taiwan, South Korea and Japan whose goods are cheaper and better in quality. It is really paradoxical that in a country where wages are low and cotton is internally available, production costs should be so high.
While certain traditional buyers of Indian textile goods like Myanmar, Indonesia, Sri Lanka, Ethiopia, Aden etc. are facing severe balance of trade problem some European countries like France, Germany, U.K. and Austria etc. have imposed quota limitations over the Indian textile imports. Acute world recession has badly affected the export prospects.
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(f) Competition from the decentralised sector-
An important factor for the growing sickness of the mill sector is the growth of the decentralised sector. Being a small-scale sector, the Government allowed excise concessions and other privileges. These accompanied with low wages have led to low cost of production in the decentralised sector.
As a result of which the share of mill sector is decreasing, while the share of decentralised sector is increasing. So much so that the share of mill sector in the production of cotton fabrics has gone down from 7.9 per cent in 1994-95 (cf. power looms 69% and handlooms 21.6%) to 4.4per cent in 1999-2000 (cf. power looms 76.3% and handlooms 19.3%).
(g) Government controls and heavy excise duties-the cotton textile industry has greatly suffered due to wrong and faulty policies of the Government. In the past the Government has sought control of price, distribution of yarn, pattern of production, etc.
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At one time the price of the cloth was fixed by the Government below the cost of production. Similarly under the yarn distribution scheme of 1972, the Government made it obligatory on all mills to supply 50 per cent of the production of yarn to the decentralised sector at reduced rates.
The high import duty on imported cotton, upward revision of the price of the indigenous cotton and heavy excise duty on cotton cloths are other detrimental factors. Another problem of the mill sector is related to the production of controlled cloths wherein mills are incurring huge loss.
(h) Sick mills-In India about 130 cotton mills are sick and incurring constant losses. The Government has set up the National Textile Corporation (NTC) to run these sick mills. Although the government has invested huge money to rehabilitate and modernise these mills, but these mills are yet to become profitable.
The NTC is facing dual problems of the obsolete machine, y and excess labour in these mills. According to a working group of the Planning Commission the industry needs Rs. 180.55 crores for rehabilitation and Rs.630 crores for the modernisation of sick mills.
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The cotton textile industry of the country is thus facing both short-term and long-term problems. Former includes problems of high prices, shortage of raw materials, liquidity problems due to poor sales and accumulation of huge stocks due to poor demand in the market.
The long term problems of the industry include the slow pace of modernisation, outdated technology resulting into low productivity, high cost of production, low profitability and increasing sickness of mills.