TIRUPUR WEAVING MAGIC

Tirupur’s success story was knitted by the ingenuity of its entrepreneurs who put Indian on the global textile map. Today it is at crossroads. With crumbling infrastructure and an environmental nightmare in the backyard, it is gearing up to face a free market future. Can Tirupur’s weavers pull it off?

You cannot miss the contrast as you enter Tirupur, a nondescript town 60-km from Coimbatore. The narrow roads are dusty and it remains hot and dry throughout the year. The rains rarely make a guest appearance so water is the most precious commodity. The hotel owner informs you that there will be no electricity during the day, thanks to the frequent power cuts the town has got used to. As you make your way through the narrow lanes, you stumble upon the dilapidated O K Senniappa Mudaliar Textile Technology Hall. A faded inscription informs you that C Subramaniam, the former finance minister, inaugurated it on August 18, 1957. It looks haunted — the doors are locked and the walls have decay written all over them. And you begin to wonder whether this is the town that breeds millionaires by the dozen.

It’s then that the contrast becomes visible: Flashy cars zip past the town’s narrow and dusty lanes. We are told that there are perhaps more millionaires per square kilometre here than anywhere else in the country. A quick glance at the growth of the town’s textile industry makes you understand why. Tirupur recorded a growth rate of 12 percent in the past five years, the highest among all industrial clusters in India and has a turnover of Rs 5,000 crore. In 2000, it accounted for about 50 percent of India’s knitted cotton exports. It is only the infrastructure that has failed to keep pace with the town’s amazing growth.

And today it is faced with its toughest challenge: As the World Trade Organisation (WTO) rules come into effect in 2005 — when the ceiling on exports are lifted and competition will come to domestic markets — it hopes to double its turnover by 2010. And that’s not too ambitious a target for a community of traders who created a large industry purely out of their entrepreneurial skills. “The fittest will survive”, says N Kandasamy, general secretary, South India Hosiery Manufacturers’ Association (SIHMA). Superhit formula Paradoxically, Tirupur’s growth as well as its state of pathetic infrastructure has to do with government policies. Its road to success was marked by what some analysts call “abuse” of government policies. The garment sector comes under the category of small scale industry SSI. There is an investment ceiling of Rs 5 crore for SSIs. A company wanting to invest above this ceiling could do so only at its own peril: It would lose lucrative government incentives like tax rebates and duty exemption. “It is common to find an entrepreneur owning 8-10 SSIs instead of one large unit,” says Mahesh Vyas, executive director of the Centre for Monitoring the Indian Economy in Mumbai.

So industries continued to benefit from this policy so long as they remained small. “There is an inbuilt policy bias towards deliberately staying small,” says Bibek Debroy, director-research, Rajiv Gandhi Foundation, New Delhi. “The economic logic behind this kind of reservation is a fraud,” adds Shreekant Gupta, Reader, Delhi School of Economics, University of Delhi. The government policy therefore discourages them from moving towards medium or large sector, where they can invest in infrastructure and better resource utilisation. It is not surprising then that Tirupur has bad roads, power shortage, poor communication and a severe water crisis. The industry blames the government for this situation. “Government support for infrastructure has been inadequate,” says Mohan P Kandasamy, former MLA and president of SIHMA.

The government refutes this. “These industries amassed wealth due to favourable policies. It is their duty now to invest in infrastructure,” says G Venugopal, of the Union Ministry of Textiles. He explains that incentives such as import exemptions and income tax rebates and the cash compensatory scheme should have prompted the industry to invest in infrastructure. Industry sources throw up figures to support their stand: They invested Rs 4 crore in the internal container depot and “gifted” 10 acres of land to the state electricity board to start a new sub-station. They have also contributed to the water pipeline project (see box: Privatised water the solution?). Affluence and effluents As industries and the government pass the buck, the ecology of the region in under severe stress. Sample this: The industry uses 90 million litres of water and discharges 87 million litres of wastewater into a dry riverbed, from where it percolates into the underground water system. The groundwater in Tirupur is undrinkable because it is very saline and polluted with chemical dyes.

Above all there is the problem with solid waste (50,000 tonnes) that lie in heaps in and around the city. To treat the wastewater, around eight common effluent treatment plants (CETPs) were set up by the industries. “But most CETPs are not functioning properly because of the huge pollution load from an ever-growing industry,” says Archana Dange, a scientist with the Centre for Environment Education in Tirupur. There was a proposal for a landfill to take care of the sludge problem, but even that hasn’t taken off. Despite all these problems, Tirupur’s traders remain unfazed. “We will overcome all these problems,” says Mohan P Kandasamy, who recently led a 35-member delegation to China to study their markets. Kandasamy’s confidence is understandable. There is greater awareness about waste minimisation and some companies have invested in cleaner alternatives like Reverse Osmosis. One company even owns its own wind mill power plant. “A clean environment in the long run makes for good economics,” adds one industrialist.

A few months ago, Tirupur’s traders sent a proposal to the Union government to set up a warehouse in Rotterdam. The logic was simple: Since it is close to Amsterdam, it would showcase Indian products in Europe and increase exports.. The traders even found a person in Rotterdam to handle the logistics. But after months of its usual procrastination, the government rejected the idea saying that it was not feasible. The traders have since then gone ahead with the project on their own. Just as they did many decades ago and created wealth out of nothing. Method to success Tirupur is the creation of the World War II. Though the first hosiery unit was set up in 1925, it was the war that created a sudden demand for cheap cotton wear, which industrial clusters in Ludhiana alone could not meet. Labour unrest in other areas where cotton industry existed — Kolkata and Kannur in Kerala — resulted in units being shifted to Tirupur. Today, the town is India’s undisputed leader in the exports of cotton products. Most industrialists here boast of a rags-to-riches story. Like A Sakthivel who began his business in a 800 sq ft rented room. The son of a police officer he began exporting in the late 1970s. Today he is not only a millionarie but also the president of the Tirupur Exporters’ Association. There are many more like Sakthivel in Tirupur.

The town also has a huge floating population, estimated to be around 150,000. Most of them come from poor families from rural Tamil Nadu in search of livelihood. “Due to insufficient rains we abandoned our agriculture,” says Malaisamy, who works in one of the industrial units. “My wife and child are also employed here,” he adds. In fact, as much as officials and the industry would like refute, child labour is Tirupur’s best-kept secret. Tirupur is also a unique case where modernisation of technology has not affected labour as old machinery ready for disposal is bought by a small producer who takes along the labourers who were working there. But there is more to Tirupur’s success than meets the eye. Industry observers believe that Tirupur's owes much of its status to the Gounder community, which raised the initial capital relying on family networks. Those with capital in the Gounder community transferred it to others in their community through long-established informal credit institutions and rotating savings and credit associations.

These networks were viewed as more reliable in transmitting information and enforcing contracts than the banking and legal systems that offered weak protection of creditor rights. The intense competition in the garment industry ensured quick growth and attention being paid to the needs of customers. There are of course non-Gounders who have now entered the industry. These traders did not have access to community funds. Yet starting with just around one-third as much capital as the Gounders, have outperformed them, developing larger-scale and better-integrated production capacity and making up more of the complicated export business. Many believe that community-based industrial clusters such as Tirupur hold the key to India's future.

(New Indian Express, November 2, 2003)