Tirupur: The once flourishing Tirupur, even during times of global economic slowdown, is presently in shock with many medium and small unit garment owners not in a position to even pay salaries to their employees, let alone a Diwali bonus. With the dollar city reeling under a slowdown, many units are closing down and hundreds of small units are even expected to shut down operations after Deepavali.
Tirupur: The once flourishing Tirupur, even during times of global economic slowdown, is presently in shock with many medium and small unit garment owners not in a position to even pay salaries to their employees, let alone a Diwali bonus. With the dollar city reeling under a slowdown, many units are closing down and hundreds of small units are even expected to shut down operations after Deepavali.
Usually during the festival of lights, the markets in the dollar city were would be thronged with consumers on a shopping spree even 2-3 weeks ahead of the festival. However, the situation has changed topsy turvy this time, opine the small and medium garment owners.
With a majority of working population in the dollar city are migrant workers, either from the North and Eastern parts of India or from the Southern districts of Tamil Nadu, the employees leave to their home towns for over two weeks after receiving bonuses and salaries. There are garment units which pay Deepavali bonuses mostly during Ayudha Pooja itself, while some companies opt to pay a day or two before the Deepavali.
But sadly, this year, Tirupur workers are in gloom as many companies are not in a position to pay bonus, while some companies have paid them partial bonuses, on Thursday.
Speaking on this state, G.R. Senthilvel , Secretary, Tirupur Exporters and Manufacturers Association said, "It is a suicidal Deepavali for many of us. Usually, we somehow manage to pay bonuses to our employees. Many of us will even be ready to pledge our wife's 'thali' to pay bonus. Our workers are part of us and completely dependent on us. And, we would not want to disappoint them at any cost. But this year, many owners are in a helpless state. I have never witnessed such a crisis in my 30 years of doing business in Tirupur."
According to small and medium-sized unit owners, Government policies, Trade agreements, GST and pressure from banks have contributed to this alarming distress. "Cutting down duty draw back to 1.92 percent has proved detrimental to exporters. GST returns are not credited on time. ROSL refunds are not processed immediately. I have a refund from February 2019 which I have not received, till date and this is the case with many small and medium units. Due to these factors, many unit owners are facing a severe cash crunch. Only manufacturers who cover everything from "Cotton to Pack" are able to manage during a crisis of this manner," added Senthilvel.
Of the total garment export in the world, India only caters to 4 percent, China holds 30 percent of the market, Bangladesh contributes 25 percent and Vietnam now has a 20 percent market share according to export data. In addition to a general slowdown in EU’s import demand , exports to the EU market from India have been adversely affected by the preferred access to competing nations like Bangladesh and Vietnam, by way of Free Trade Agreements (FTAs).
The industry by itself has the capacity to survive bad times because when there is an economic slow down in the export market, manufacturers cater to the domestic market and survive the crisis period. But this year, since Indian economy is facing a downturn, domestic orders have also come down.
Muthurathinam, President, TEAMA stated that there is an overall drop in the buying capacity of consumers nation wide and this has affected manufacturers supplying to domestic markets like Mumbai and Pune.
Murugesan, a small business owner in Tirupur stated that many small units have closed down after demonetisation and GST. "Garment manufacturing units encompasses of 23 processes from production to the yarn stage and then to the final product. Except for a few corporates, 90 percent of the industries depend on job orders done by small units. After demonetisation and GST, many industries were not able to manage and many shut down. The crisis is so bad that a few unit owners were unable to pay back debts and have resorted to suicide."
He added that "In such a scenario, Deepavali bonus has become a huge burden. Most companies somehow manage to pay the minimum 8.33 percent bonus but there are companies which are not able to pay even salaries to their employees which has never happened in Tirupur," lamented Murugesan.
A gloomy situation indeed is prevailing across the city and small business owners, call it a sad Deepavali. "A few years ago, Deepavali used to be a joyous occassion. We used to pay hefty bonus amounts and send our workers to their hometowns for a two weeks holiday. I can still recall the days, when I presented gold coins along with bonuses to my workers. Now, that is not the case. Though we are in no state of paying hefty bonuses, we cannot disappoint our workers, so we borrow money from financiers and pay whatever we can."
"Earlier, we used to inform the workers to return to work as early as possible, after Deepavali. Now, they are asking us when to return and we do not have an answer. Lack of new orders will lead to closure of 30 to 40 percent of units post Deepavali," lamented R. Chandrasekar, a small business owner.
However, the Tirupur Exporters Association is positive about the market in spite of the market being dull. Raja M Shanmugam, President TEA claims that exports have increased from Rs. 12,000 crores last year in this period to Rs. 13,500 crores this October. "Companies have paid the minimum required bonus of 8.3 percent and a few have paid even more, which differs with each individual company. There are issues like duty draw back and FTAs which have affected the industry. We have made representations to the Government so that the small and medium-sized companies should not be affected in the long run," he added.
Tirupur in many ways reflects the state of affairs prevailing in the country, with economic slowdow affecting small and medium businesses everywhere, while corporates are just about managing to stay afloat.