For the National Textile Corporation (NTC), Covid-19 only exacerbated issues plaguing the money-losing garment-sector business, industry analysts say.
The government-owned organization had taken over more than 119 textile mills since the 1970s, though it now runs just 23 after dozens of shutdowns.
Worker unions contest recent rumors that NTC is on the brink of collapse. With more than 7,000 workers on their rolls, union leaders in Mumbai’s NTC-owned mills said they hope to preserve their jobs as long as possible despite little sign that the government would salvage the ailing corporation.
Though NTC controls hundreds of millions of rupees’ worth of land across India, there’s little chance of converting valuable Mumbai-area parcels back to textile-producing sites. “They also can’t be used in the present state—the machinery is old and falling apart, as are the buildings,” said one worker who asked not to be named. “The government simply wants the mills to shut down so that they can sell off the land. There are land sharks waiting and trying to make this possible.”
Production at NTC-owned mills has been spotty since the pandemic first disrupted business early in 2020. Union leaders said just 14 mills or fewer functioned in 2021, and even that was unreliable.
“We don’t believe NTC should completely shut down, we think it should work, it should continue, it is an example,” Naishadh Desai, president of Indian national textile workers federation, Gujarat, told Sourcing Journal.
“When the nationalization was started, the land value was not like this—now since the prices have gone so high, they want to sell the land. Actually, this money should be taken to start the mills in the village areas where the labor is, and more land can be taken for the same investment,” he said, adding that their position has remained from the workers side, for continued support for workers from NTC.
“But they are always telling us that it is a huge loss, and government cannot bear these costs and are providing for workers retirement schemes,” Desai said. “Each time a worker retires they cancel the post. Now trade unions for workers are very weak.”
“There are only five or six units which they want to keep on paper and modernize, and while they prepare the budget, we don’t see any action as a whole for NTC,” Desai said.
Industry stalwarts are pragmatic about what they see as an impending—and necessary—closure.
“NTC had no reason to be born, and has no reason to exist. These mills simply can’t be revived. The economic will is not there, and it is actually impossible to revive mills that have been sick for so many years. They have outlived their utility long back—they cannot earn profitably any more,” said DK Nair, former head of the Confederation of Indian Textile Industry.
“Although it is politically difficult to shut down because of trade unions there are struggles going on in various mills,” he continued. “No one wants it to close down, because their salary depends on that. But it’s like flogging a dead horse.”
India, Nair went on to say, has the “best spinning industry in the world” as the “largest exporter of yarn.”
“It is the only segment in the textile industry we are world class—our productivity is low in terms of knitting and weaving but in terms of yarn we are the second largest producer in the world after China, and the largest exporter in the world,” he added.
“Our industry is very capable. But to revive these [mills] is clearly not a possible solution,” he said, quoting one of Shakespeare’s most famous lines from ‘Macbeth’: “Nothing in his life became him like the leaving of it.”
“I think he had NTC in mind,” Nair quipped.
Meanwhile, a union textile ministry’s letter earlier thiis year titled ‘Closure of NTC’ fueled speculation that the government-run enterprise was at risk of shutting down.
The letter purportedly sought details on expenditures through June 30, existing and pending payments, and cost of Voluntary Retirement Scheme (VRS) to all employees, to understand the path forward.
Documents reveal that NTC’s losses are piling up.
NTC’s 2019-20 financial statement shows a net loss of 3.50 billion rupees, or $43.96 million, up from 3.10 billion rupees or $38.95 million in the prior year. The only year that the statement showed profit was in 2016-17, when NTC sold land resulting in a positive period generating 9.69 billion rupees or $121.74 million.
Meanwhile, NTC in 2012 invested 55 billion rupees or $690.84 million in voluntary retirement schemes, one-time settlements and clearing outstanding dues. It also spent 16.46 billion rupees or $206.72 million on modernizing and reviving textile sites though units continued shutting down.
In a report to parliament by the standing committee on Labour, Textiles and Skill dDvelopment earlier this year, the Committee expressed “deep concern” that “NTC had been incurring losses for the last three consecutive years.”
It listed myriad factors limiting NTC’s viability, including a lack of modernization, undesirable locations, little economy of scale, a lack of forward integration and added value, poor infrastructure, and outdated technology.
Parliament has questioned NTC’s future as a going concern. Darshana Jardosh, minister of State for Textile, said that in light of NTC-owned mills’ continued challenges the Ministry of Textiles was preparing an action plan in concert with NITI Aayog, a state-run policy think tank, and the Department of Public Enterprises under Ministry of Finance.
The ministry claimed that the employees were being paid wages and statutory dues as per mutual agreement between management and representing workers of the mills.
In March, the minister told S Gnanathiraviam, a member of parliament from Tamil Nadu-based party Dravida Munnetra Kazhagam, that NTC mills haven’t managed to ride modernization investments into a viable path forward.
The tides are shifting away from nationalization toward privatization’s focus on creating more competitive and successful units.
The Indian textile industry has been pushing for innovation, and Union Textile Minister Piyush Goyal recently came up with a five-point mission for the sector in New Delhi. An industry focus on innovation, sustainability, digitization, newer products and Free Trade Agreements could achieve $100 billion in exports over the next five to six years, up from $40 billion today.
“It is time to put aside issues of mismanagement, wrong decisions, other considerations and cut the losses,” said an official who asked not to be named. “All the earlier plans for revival have not helped us stay afloat in a competitive market. It is time to look ahead.”