Mumbai’s Mulji Jetha market found flooded with Chinese textiles

Mulji Jetha market, a 136 year old textile market in South Mumbai and the largest textile bazaars in Asia with hundreds of wholesale stories and some retailers too. The market which is still crowded and customers stream in endlessly but it has changed fundamentally. Instead of fabrics from the country’s traditional textile hubs, it is flooded with Chinese textiles.

One such customer of this market, over half a century back, was a certain Dhirubhai Ambani, who would purchase fabric in bulk for export to secure yarn-making licences from the government, before he went on to script the rise of India’s largest private enterprise.

According to Premal Udani, managing director, Kaytee Corp. Pvt. Ltd, an apparel manufacturer that supplies to Wal-Mart Stores Inc., Mulji Jetha hardly had any imported items 25 years ago. Now, there are hardly any local textiles.

The issue is critical for fabric compared to apparel. The Chinese onslaught, or flooding of cheap Chinese items, is yet to happen in the apparel sector. If the government does not take a long-term approach, the organized mills will extinct in 10-15 years.

According to Udani, Bangladesh’s apparel market was just $3 billion five years ago, while India’s was $5 billion. Currently, India is just $16 billion while Bangladesh has grown to $28 billion. The eastern neighbour has now started making denim and will enter more categories, he cautioned.

Rajeev Gopal, chief marketing officer at viscose staple fibre maker, Birla Cellulose, a unit of Aditya Birla Group said that the Indian textile industry is facing serious threat from China, and even Indonesia, across the value chain—from fibre to yarn to fabric and even garments—on account of dumping at very low prices.

The Indian textile industry, though competitive, especially in the upstream, is facing a squeeze on margins due to such low prices. This will result in closures and will discourage investments in this vital sector which is a large employment generator and a foreign exchange earner. The government will need to provide safeguards to ensure reasonable returns for the Indian industry.

The Chinese avalanche has reached the doorsteps of Reliance Industries Ltd (RIL) too, whose founder made his early fortune at Mulji Jetha.
On 24 September, Anil Rajvanshi, senior executive vice-president and head (corporate and industry affairs) at RIL, in his capacity as chairman of the Synthetic and Rayon Textiles Export Promotion Council (SRTEPC), wrote to Arvind Subramanian, India’s chief economic adviser, warning about a steady increase in imports of Chinese fabrics.

Last year, imports of fabrics touched $850 million, or Rs.5,500 crore. Ninety-five percent is imported for trading at the cost of domestic industry and 100,000 labourers are rendered idle owing to these imports and revenue loss as the Modvat (modified value added tax) chain breaks.

All the neighbouring countries, Bangladesh, Thailand, Indonesia, Vietnam and China, have same rate of VAT (value-added tax) or excise duties on all natural and man-made or synthetic fibres as a result the textile industry in all these countries has grown in double digits in the last five years.

The purpose of Modvat is to avoid the cascading effect of taxes on both inputs and final products. The scheme permits a manufacturer of excisable goods —like textiles—to avail of credit on duty paid on the notified inputs received and used in or in relation to the manufacture of final products and to utilize such credit towards the duty liability on disposal of final goods.

According to SRTEPC data, availability of all fibres in India is 10 billion kg, with cotton at 6.5 billion kg and man-made fibres at 3.5 billion kg. In order to achieve Modi’s target, India needs to double the size of fibre availability to 20 billion kg. With limited compounded annual growth rate (CAGR) of cotton at 1.5%, the production of man-made fibres has to be increased three times to around 12 billion kg.

SRTEPC said that imports of fibre, yarn and value-added products such as finished textiles should be discouraged, as it badly hurts the domestic industry, capital and manpower employed.

Import of fabrics should be allowed to actual users and under advance licence only. The association said that it was shocking that the value of fabric imported under advance licence is below Rs.300 crore in the last three years while in the last year alone, imports, mainly from China, were to the tune of Rs.5,500 crore. The bulk of fabric is imported by traders, who retail in India, hurting domestic textile producers.

Babubhai S. Ahir, promoter of textile firm Challenge Enterpises Ltd, said that the domestic fibre manufacturers cannot match the price offered by

Chinese companies as a result the Mulji Jetha market is covered with more Chinese fabric products. Due to this Chinese dumping over 80% domestic fibre manufacturers are now extinct.

In India, the textiles sector employs the maximum workers after agriculture. Prime Minister Narendra Modi wants the sector to triple in size—from the current $110 billion to $300 billion by 2020. The changing hues of Mulji Jetha market attests to the urgency of the task.