Can Lakhan Mills beat the removal of QRs on textile imports? Jiban Mukhopadhyay of Tata, Hemant Shah of Hindoostan Mills and Anees Noorani of Metropolitan Trading discuss.

By R. Chandrasekhar

We have crossed the final frontier in global trade,'' said the official of the Union Ministry of Commerce, looking straight into the news cameras. It was evident from his self-assured manner that he had mastered the art of the sound byte. Watching him perform on TV, soon after the ExIm Policy 2001-2 was announced on March 31, Cyrus Batliwala, CEO, Lakhan Spinning & Weaving Mills Co, was amused. And angered. As a leading spokesman for the Indian textile industry, Batliwala had always campaigned for what he called ''internal liberalisation'' as a precursor to opening the doors to competition. ''Final frontier, huh?'' he said to himself. ''Final offensive on indigenous enterprise is more like it.''

Batliwala had been with Lakhan, one of oldest composite textile mills in the country, for more than two decades. He had steered the company through every crisis-right from the invasion of powerlooms in the 80s to the deluge of foreign textile brands in the 90s. But nothing, Batliwala felt, would beat the removal of Quantitative Restrictions on textile imports on March 31, 2001 for its novelty. And naiveté.

''True, we saw it coming,'' he said, addressing his A-Team later in the evening. ''Right since 1991, there has been a progressive move towards dismantling trade controls. It is also true that we have a breathing time of three more years before the tariff rates are brought in line with the requirements of WTO. But the cost structure is simply not in favour of Lakhan vis-a-vis, say, China-based Shanghai Clothing Co., which is invading our turf. Shanghai Clothing gets power at Rs 1.75 per unit, whereas we pay Rs 4 per unit. It borrows funds at about 6 per cent while our cost of finance is 15 per cent. Where is the level playing field?''

''I visited the plant when I was in China last week,'' said Vikram Roy, Vice-President (Marketing). ''Shanghai Clothing has aggressive growth targets. It gets a quarter of its export revenue from the Indian market and wants to double it every year. Its efforts at market expansion are focussed and concerted. All the way. Its labour force is energised. The productivity per person there is Rs 30 lakh. Lakhan's is Rs 2 lakh per person. The infrastructure support provided in China for textiles is very good. The turnaround time at Shenzen port is 24 hours, compared to 7 days at Nhava Sheva in Mumbai.''

''A desperate situation calls for desperate solution,'' said Batliwala. ''But let us first review the initiatives we have taken so far. We can then examine the various options before us.''

Back to basics

''Cost control has been the sheet anchor of our strategy,'' said Sourab Sen, Vice-President (Manufacturing). Indeed, Lakhan had taken four major steps in this regard. First, it had shut down the unit at Parel which was manufacturing low-end products, where price competition from powerlooms was stiff. Second, it had begun concentrating on exports where price realisations were higher. Ergo, from a 15 per cent share of turnover in 1994, the share of exports has gone up to 40 per cent. "We are chasing a target of 50 per cent by 2003,'' said Sen.

''We have set up a 100 per cent EOU at Nashik in technical collaboration with an Italian firm. Lakhan has also taken several change initiatives like tqm. We have spent Rs 100 crore on modernisation in the last four years, with specific focus on flexibility and product development ''

''That apart,'' added Roy, ''the product mix is being rationalised. We have been focusing more on the manufacture of high-end products like readymades and garments. And also on higher width fabric which helps us secure economies through lower unit cost. We are also changing the sales mix which at present breaks up into 25 per cent to garment manufacturers, 32 per cent, exports and the rest, retail. The mix will change gradually in favour of exports and sale to garment makers. That is where lie high yields.''

''These measures are fine,'' said Batliwala. ''But they do not preempt competition.''

''There is one area where our competitors in the Asian region are vulnerable,'' said Roy. ''They cannot handle niche businesses. They are good at mass production and mass marketing. But they are not comfortable with smaller production runs requiring flexibility in manufacturing. This is where we should take them on. Lakhan, for example, can deliver the finished sample of a fabric in two weeks. That is a formidable advantage which firms like Shanghai Clothing can not match. We should exploit it fully.''

''We should move into the high end of the value chain,'' said Damodar Hegde, Vice-President (Finance). ''We should stop making basic products-like the normal fabric-and move into value-added items like non-iron, anti-crease, water-repellent, and fire-resistant fabrics. These technologies are available today for a price. We should also expand our retail network and concentrate on branding where the ROI is much higher.''

''We should start looking at options like sourcing cheaper fabric from the Southeast and the Far East, add value in India, and re-export," said Chintaman Deshmukh, Vice-President (Special Projects). ''For example, we can get our manufacturing done outside India by leasing garment factories. We should also get into JVS with players in the Asian region. That will preempt competition.''

''If you can't beat them,'' said Roy, ''join them. There is merit in turning our competitors into allies.'' "But what we need," Batlivala reminded his A-team, "is quick solutions. Now if someone can just name some.''

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