CHAPTER IV

THE AHMEDABAD COTTON TEXTILE INDUSTRY

EVOLUTION AND DEVELOPMENT

Ahmedabad had been a prosperous town since the

except for the 17th and 18th Centuries when

hardships of invasion. In fact, the great Moghul

to borrow money from its ¢Sethias'. Up to the

15th Century,

it faced the

emperors used

mid-nineteenth

Century, Ahmedabad was famous for manufacture and export of

¢Kinkhab' and ¢Mashroo' cloth, an established centre of cloth

printing, as well as a trading centre of indigo and cotton fibre.

With the invention of synthetic dyes, the indigo trade gradually

died. The market for silk and brocade also gradually became

curtailed, and the merchants began exploring for new avenues of

business.

The advent of an ex-government servant na~ed Ranchhodlal Chotalal

on the scene in 1860 proved to be a catalyst for the

establishment of the cotton textile industry in Ahmedabad. The

machinery and equipment of this first mill in the city, a

spinning mill of 2500 spindles, was brought from Lancashire, and

the mill was opened in 1861. Other entrepreneurs followed suit, I

and by 1878 there were 4 mills. The jain and vaishnav banias who

had kept aloof from the industry for almost two decades now came

out of the conservative trading and money-lending operations and

started establishing mills. By 1900, there were 27 mills in the

city.

The textile mills in Ahmedabad were modeled on Lancashire. Even

the buildings were built in the style of Lancashire mills, multi­

storied and windowed. The first managers, technicians and workers

were also brought from there, so that their methods and

organisations came to be exactly copied, irrespective of their

81

·-suitability or convenience for the country, climate or nature of

the people (Rice,l958);

The mills were promoted by 'Managing Agents' whereby an

individual, a group of individuals, or a private limited company

managed a business on behalf of its owners for a commission

either on turnover or profit. Large managing agencies in India

used to manage upto forty different business~s either as a single

agency or as a group of agencies all composed of the same

individuals.

agents, in

In a system peculiar to Ahmedabad,

a~dition to giving interest, also

the managing

shared their

commission with the public depositors to attract capital for

their ventures.

In Ahmedabad, unlike elsewhere, the managing agency agreements

were not subject to a time-limit and were "permanent and non­

changeable". The commission was based on sales unlike other

centres where it was based on gross profits or production.

However when in any particular year the company earned less than

enough to pay. a dividend of 6%, the managing agents would forego

their commission upto a maximum of one-third. The Managing agents

at Ahmedabad also did not avail of ¢office allowance' unlike

Bombay and Calcutta. The managing agency system continued

successfully until it was abolished by the Government in 1966.

In the latter part of the Nineteenth Century, China was a major

market for Indian yarns and the Ahmedabad mills exported large

quantities of yarn, the balance being consumed by the handlooms

in Gujarat and Deccan. Some of the cloth-producing mills

manufactured -long-cloth and jeans, and later on coarse and medium

count dhotis for the farmers and poor classes.

The First World War provided considerable stimulus to the

industry and by 1921 there were 51 mills, of which 34 were

composite units. The purely spinning units had proved unviable

and had reduced from 17 in 1911 to 10. There were 7 purely

weaving units, of which none survived by 1944. They were either

closed down; or were converted into composite units. In 1923, one

82

of the mills started manufacturing fine and superfine fabrics and

some other mills followed suit. By 1941 many of the Ahmedabad .. mills specialised in fine count fabrics (Table 4.1) and imported

nearly half of their cotton consumption needs from Egypt. They

also diversified from gr~y to coloured and fancy fabrics. (Table

4.2)

TABLE 4.1

IMPROVEMENTS IN THE QUALITY OF FABRICS : 1921-1941

Centre

Bombay

Count

30/40s

above 40s

Ahmedabad 30/40s

above 40s

1921-22

% of Total prod.

1.7

0.3

6.5

0.9

1941-42

% of Total prod.

11.5

6.4

17.3

18.3

Source: Mehta, S.D., The Cott~n Textile Industry.

TABLE 4.2

IMPROVEMENTS IN PROCESSING OF FABRICS : 1921-1941

Centre

Bombay

Variety

Grey

Coloured

Ahmedabad Grey

Coloured

Source : Ibid.

1921-22

%

63.6

36.4

93.2

6.8

1941-42

%

71.8

28.2

66.6

33.4

83

The defense

unprecedented

requirements of World War II resulted in

rise in cloth prices and high profits for the

mills. However, though the profits made in World War I were

ploughed back towards the establishment of new mills and

expansion of the old ones, the high excess profit tax levied by

the British Government during World War II did not leave enough

reserves to rehabilitate the worn out machinery, the prices of

which had incFeased nearly four-fold. Other textile centres like

Baroda, ruled by erstwhile Maharajas, prospered as they were not

subject to this tax. Moreover, countries like Japan, ,Great

Britain and Germany were re-building their own textile

industries, resulting in a huge scarcity in the world textile

machinery markets. The cost of rehabilitating the Ahmedabad

mills was estimated at around Rs.700mn. by The Gujarat Textile

Reorganisation Committee in 1968. Another disadvantage of the

War period was that since prices and production were controlled

and almost any cloth could command a sale, both management and

workers sacrificed on quality. Later on, mills had to struggle to

reintroduce former standards of quality.

From several points of view, the cotton textile industry of

Ahmedabad reveals certain distinctive features. Though the hot,

dry climate of the city and its location in the middle of a wide,

dusty plain·made it unsuitable for the manufacture of textiles

(Rice, 1958), the abundance of raw cotton, labour and a large

consuming market for yarn textiles in and around Ahmedabad

combined with an entrepreneural class of traders of modest means

but great organising ability fulfilled the rest of the conditions

for its rapid development. This is in direct contrast to the

Bombay mills which were promoted mostly by successful

industrialists, many of whom had prospered greatly from the

Am e r i can C i v i 1 W a r ( 18 61 t o 18 G 5 ) by ex port in g cot ton t o 13 t· i to i n .

In Bombay, the industry was organised for the export trade in

yarn and later on grey fabrics, while the Ahmedabad industry was

started primarily to take advantage of the large supplies of raw

cotton

Bombay

the

and the fabric-consuming markets around it.

mills have been, on the whole, much larger in

Ahmedabad mills. Another important factor

Hence

size

that

the

than

has

84

considerably influenced the size of mills in Ahmedabad has been

the initial promotion and financing. Though the units were

formally joint stock in nature, in reality they were largely

proprietary in character since the funds had been subscribed

largely by the promoters who were managing agents. The public

subscription of shares was minimal but they came in as depositors

of funds with the managing agents. This can be seen from table

4.3.

TABLE 4.3

MAJOR SOURCES OF CAPITAL FOR THE MILLS

( Mn .Rs.)

-----------------------------------------------------------------'

;

BOMBAY

1930

AHMEDABAD

1930

---------~-------------------------------------------------------

No. of mills

Loans by:managing agents

Public Deposits

64

53.20

27.30

64

26.40

42.60 I -----------------------------------------------------------------

Source : Ibid.

Though the size of the units was small and the production

consisted of coarse and medium count yarns from indigenous cotton

to begin with, most of them expanded their capacity gradually and

diversified into composite units. The Ahmedabad mills a1so

switched over to finer counts much earlier than did their Bombay

counterparts and produced more fancy fabrics using Egyptian

cottons. (Table 4.1) The Swadeshi movement initiated by Gandhiji

discouraged the sales of British fabrics and gave a fillip to

the change-over. The Tariff Board of 1927 recommended

diversification of the product-mix and the new mills were

equipped with specialised machines for spinning and weaving finer

counts. Not only this, they were also equipped with substantial

processing machinery and produced more processed cloth (Table

85

4.2). Within a short span of two decades 1911 to 1931, the number

of purely spinning units declined from 17 to 6, either due to

liquidation or diversification to include weaving machinery.

Between 1931 to 1935, 6 weaving units were scrapped or went into

liquidation, so that by 1944, there were 61 composite and 5

spinning mills in the city (Mehta, 1949).

Less than 18 prominent families controlled and managed more than

4/5 of the total units as managing agents, prominent amongst

them being the Kasturbhai Lalbhai Group (7 mills), the Chamanlal

Parekh Group (7 mills), and the Motilal Hirabhai Group (5 mills)

(Mehta, 1949). This phenomenon resulted in centralised control

and economies for these mills in the finance, purchase and

marketing functions.

The partition of the country in 1947 adversely affected the

Ahmedabad textile industry. Superior qualities of cottons which

were needed. for the varieties produced by the Ahmedabad mills

were grown in the rain-fed tracks which went to form West

Pakistan and became unavailable (Table 4.4). Moreover, the

Ahmedabad mills also lost a huge market to which it had specially

catered in terms of special varieties.

86

TABLE 4.4

THE EFFECTS OF PARTITION ON COTTON PRODUCTION IN INDIA

1946-47

(Pre-Partition)

1947-48

(Post-Partition)

Area

( •ooo Acres)

14,860

10,655

Production

(•ooo Bales)

3,566

2,188

No. of

Textile Mills

423

409

Source :Kulkarni, V.B. (1979), History of the Indian Cotton

Textile Industry, Bombay.

Between 1947 and 1951 when planned industrial development was

initiated, Gujarat was considered a surplus region and expansion

of existing units was not permitted. (Gujarat, Govt. of, 1968.)

In the initial periods, scarcity of cloth due to a short supply

of cotton brought additional advantages for some mills, but on

the whole, the Ahmedabad mills suffered during the readjustment

period. The government of India enacted the Cotton Textile

(control) Order in 1948, under the parent provisions of the·

Essential Supplies (Temporary Powers) Act, 1946. The provisions

of the 1948 Order gave the government wide powers to exercise

control over the textile industry. Production and price controls

were introduced and in 1950, another notification reserved

certain types of dhotis, sarees, lungis, bed-sheets, chaddars,

bed-covers, plain weave coarse cloth and towels for the handloom

sector. An· Ordinance in 1949, and later its replacement The

Cotton Control Order, 1949, vested in the Central Government wide

powers to regulate the prices, supply, distribution, transport,

trade, etc. in cotton. These were followed by other controls

throughout the Plans.

87

Maha Gujarat was formed in 1956, and The Indian Cotton 1 Mills

Federation in 1957, a critical year for the textile industry. The

subsequent years are characte~ised by severe ups and downs for

the industry. In addition to the general complaints of demand

recessions, inflationary pressures which resulted in increased

costs of production, shortage of finance, controlled cloth

obligations, increasingly heavy excise duties, irregular cotton

supply at high prices, unavailability of indigenous machinery and

severe restrjctions on the industry, the Ahmedabad cotton textile

industry had to contend with severe coal and power shortages,

comparatively higher octroi and sales taxes and later on even

water shortages in summer. Modernisation was very difficult. The

indigenous producers could not meet the demand even though their

range

import

Above

was limited, obsolete and of inferior quality. There

restrictions

all, there

on machinery and custom duties

was severe shortage of finance

were

due to

were

high.

RBI

controls on long and short-term credit. The Reserve Bank of India

even restricted mills from accepting public deposits in excess of

25% of paid-up capital and free reserves. Increased borrowings

raised interest costs of mills by 3 times in 6 years from 1961-

1967(ATMA, 1968).

While wages kept on increasing, there was no commensurate

increase in production or productivity. The report of the Indian

Embassy in France in 1963 exploded the myth of lower Indian

labour costs. "In spinning, on 20s to 30s counts, the average of

workers employed in Europe per 100 spindles has been worked out

to 1.8 as against 10.7 in India. In weaving, per 100 looms, the

comparative average figures for workers work out to 15.0 and 70.1

respectively."(Kulkarni, 1979). The competition from powerlooms,

initially mainly in fine and superfine varieties which attracted

heavy excise duties, was severe. Average excise duty paid by

powerlooms was only 5.0 paise per yard compared to 30.5 paise

paid by the organised sector. In the export markets, chief

competitors for the varieties offered were Pakistan, China and

HongKong. In fact, HongKong only re-exported textiles and could

still compete successfully given our high prices, narrow product­

mix and low quality. In 1964, the average price realisation per

88

metre of India's exported cloth was as low as 99 paise (Kulkarni,

1979) .

The rupee was devalued in June 1966 and The National Textile I

Corp6ration was set up in 1968, when almost 76 mills in India

were closed. In 1960, only 2 Ahmedabad mills had made losses. By.

1965, 26 mills were making losses. The 1960s were described by

The Hindu as "ten agonising years of unprecedented stress and

strain and uncertainty in almost all spheres of activity. The

decade has witnessed the death in harness of a President and two

Prime Ministers, three military invasions, two severe droughts,

devaluation of·currency, unrest in field, factory and school and

violence and turmoil in many parts of the country."

In the 1970s, the picture was no different. Rising prices,

tariffs and wage costs, severe credit squeeze and controlled

cloth obligations coupled with low offtake and stiff competition

from powerlooms resulted in more mill closures. The excise duty

structure discouraged the mills from producing fine and superfine

varieties for which duties were 43p and 64p (grey) respectively

as against l8p for higher-medium varieties. According to ATMA,

between 1970-1975, the gross block of the Ahmedabad textile

industry increased by Rs.930mn. to Rs.2590mn. 1975-76 was one of

the worst years for the textile induscry. In Ahmedabad alone, 30

mills for which figures are available made a net loss of more

than Rs.l70mn. The government announced the multi-fibre policy .in

1976, making the use of man-made fibres compulsory in the fibre-

mix to

hybrid

overcome the recurring cotton shortages and some

cotton varieties were developed. IDBI announced the

good

Soft

Loan Scheme for modernisation. However, response of the mills was

initially poor. After some modifications, by 1979, a bumper year

for t h e t ex t i l e in d u s t r y , 2 4 m i 11 s h ad a p p 1 i e d f o t· 1 o .:1 n s

amounting to Rs.490mn.

For the Ahmedabad industry, the coal and power shortages and

their high rates were an additional burden. Mills in some years

had to purchase coal at premiums of up to Rs.200/tonne. The unit

cost of power in Ahmedabad, the highest in the country, was 50.6p

89

in 1980. In Ahmedabad, coal and power costs as percentage of

production costs increased from 3.8% to 10.0% in 5 year~. In 1980

alone, loss of output due to power cut was estimated at 95mn.

mts. in additi6n to lay-off wages. 37 mills in Ahmedabad

installed 100 DG sets to overcome the power problem. By 1990, the

cost of power rose to Rs.l.5 per unit. With the addition of 20%

electricity duty and 4% sales tax on electricity, they were the

highest in the country.

Locational Cost Disadvantages of the Ahmedabad Mills

Until very recent times, textiles and its ancillary industries

were the only predominant organised industries in Ahmedabad. As a

result, some of the levies were focused by the Municipal I

Corporation primarily on the textile industry as a major source

of revenue since its collection was much easier from an organised

industry. The difficulties in the availability of coal, its high

prices and its low quality has plagued the Ahmedabad industry

since many years. Mills have been forced to pay high premiums on

very low quality coal. The high costs of power and almost

continuous

recurring

agitations.

power cuts for the industry have also been

ob~tacle and so have the nav-nirman and

Table 4.5 brings out the overall impact

another

communal

of cost

disadvantages from four major factors - sales tax, octroi, power

and wages - on the Ahmedabad textile industry as compared to the

textile industries in six other States of India computed for an

average mill of 25,000 spindles and 500 looms in 1987.

90

Element

of Cost

Sales/

purcha1.se tax

TABLE 4.5

COST DISADVANTAGES TO THE AHMEDABAD MILLS (1987)

(Thousand Rs.)

Annual Savings in Cost if unit were located in

Tamil-Nadu Maharashtra M.P. Haryana Punjab Kerala

( 9) 48 276 48 108 ....:

Octroi':;' excise/

entry tax 324 288 792 24 1512

Power I

Wages

Total

Note

4668 2208 5052 3504 5448

(57) (1512) 3468 15768 13344

- - - - - - - - - - - - - - - - - - - - -4926 1032 9588 19344 20412

: Figures in parenthesis indicate comparative

advantage to a mill located in Ahmedabad.

324

8040

1332

- - - -

9669

cost

Figures based on an average mill of 500 looms and 25000

spindles.

Source : Prafull Anubhai, Sickness in Indian Textile Industry

Causes and Remedies, Economic and Political Weekly,

Nov.26, 1988.

The textile sickness became endemic and in 1985 the government

came out with the New Textile Policy. The state government also

introduced a "package of assistance" to help out 34 sick mills by

way of offering moratoriums, exemptions and soft loans and

guarantees of Rs.704mn. on their behalf. ~he year 1982 had seen

the longest and biggest strike in the world when the Bombay mills

were closed for 18 months. The powerlooms benefited immensely

from the strike, and built up a regular steady clientele. The

share of the organised sector of the textile industry in total

91

cloth productio~ was reduced from 47.5% in 1970 to 38.4% 1n 1980,

27.4% in 1985, ~nd 19.9% in 1990.

While the security price index of ordinary shares (1980-81=100)

of all industries increased to 136 in 1984-85, that for cotton

textile industry decreased to 86.7, reflecting the loss of

confidence of investors. Fixed deposits from investors also

decreased and the trade credit period also kept on increasing as

traders encountered resistance to mill-made fabrics from

consumers. By 1990, out of 63 composite units in Ahmedabad, only

27 private, 7 NTC and 7 GSTC units were running. Sixteen private

and 6 GSTC units were closed. Three out of the four spinning

mills were also lying closed. Even out of the 27 priva~e working

mills, 12 mills were already under the purview of the Board. for

Industrial and Financial Reconstruction (BIFR) and subsisting on

government loans under the Sick Industrial Companies (special

provisions)' Act, 1985. Most of the statistics in this and the

following section have been obtained from ATMA ~The Ahmedabad

Textile Mills Association).

.. PRESENT PROFILE

The Ahmedabad cotton textile industry consists of 63 composite

mill units and 4 spinning units. In 1990, 22 private sector

composite units and 1 units under GSTC were lying closed, and 12

of the remaining mills had been declared sick and referred to the

Board of Industrial and Financial Reconstruction (BIFR). This was

the highest since 1976 when 39 mills were lying closed in

Ahmedabad. Table 4.6 shows a general profile of the Ahmedabad

composite mills. There were 2.5mn installed spindles 1n 1975

which increased by 2.9% to 2.6mn in 1980 and were reduced to

2.0mn in 1985 due to mill closures. The total installed loomaae

increased by only 2.1% from 1975 to 1980 and decreased by 25.5%

by 1985 both due to mill closures and because ordinary looms were

replaced by the more productive automatic looms in some mills.

Thus automatic looms increased by 13.7% in the decade 19~5-1985

while total installed loomage decreased by 23.9%.

92

Fibre Consumption

Table 4.7 shows the raw material consumption of the Ahmedabad

mills. In 1975, the consumption of man-made fibres was negligible

and data is not available. By 1980, the mills consumed 88.6%

cotton fibre and 11.4% man-made fibre (MMF). This may be

attributed to the Multi Fibre Policy (1976) which made the use of

10% MMF compulsory as well as a response to changing consumer

behaviour, which shifted towards non-cottons and blends. By 1985,

the industry•s consumption of raw cotton formed only 84.4% of the

total, and. the consumption of filament yarns, especially

polyester, increased to 6.7% of the total consumption. Actual

consumption of fibres decreased due to decreasing production of

existing mills and closure of many mills.

Yarn Production

Yarn production of the Ahmedabad mills, including captive

consumption, civil deliveries and exports was ll8mn kgs in 1975,

132mn kgs in 1980 and 79.5mn kgs in 1985. Table 4.8 ·shows ~n

detail percentages of count-wise productions of cotton, non­

cotton and mixed/blended yarns. Exports of yarn from Ahmedabad

were negligible and have only been attempted since 1989-90. It is

clear that the industry has been heavily concentrating on the

medium counts of 2ls to 40s for its cotton yarns. 81% to 86% of

its cotton yarn production has been accounted for by these medium

counts through the years. For the non-cotton and blended/mixed

yarns, the average counts bave been slightly finer, between 3ls

to 60s. By 1985, the MMF yarns became still finer, and more than

75% were accounted for by the fine and superfine 4ls to 80s

counts.

Initially, the Ahmedabad mills were not oriented towards yarn

sales. Civil deliveries accounted for only 6.1% of the total yarn

production. This may be attributed to the fact that most of the

mills were well balanced, so that all the yarn produced was

needed for captive consumption on its own looms. Some adjustments

that were needed due to quality changes were made through running

93

or stopping extra shifts. With increasing modernisation and the

consequent increase in machine speeds, the equation changed, and

there was often yarn to spare for selling. Initially, it was

compulsory

its yarn

for the mills to produce a stipulated percentage of

sales in hank form for the decentralised handloom

sector. In times of acute recession, some mills also resorted to

yarn sales as a way to meet their most urgent working capital

requirements. As the decentralised sector continued expanditlg

rapidly, yarn sales became more remunerative. Exports were

restricted by the government to assure provision of adequate yarn

for the decentralised sector, and after 1986 only allowed with a

ceiling of 40mn Kgs in certain years of low raw cotton

availability except for exports against the Advance Licensing

Scheme.

Cloth Production

The overall trend in cloth production of the Ahmedabad mills from

1975 to 1985. has been a drastic reduction in meterage from

1015mn. mts. in 1975 to 799mn. mts. in 1980 and to 597mn. mts. 1n

1985 due to mill closures coupled with increasing productions of

blended/mixed varieties (Table 4.9). Until 1980, the Ahmedabad

textile mill .industry accounted for one-fourth of the All-India

mill production of cloth. By 1985, it was reduced to 17.5% of the

total production (In 1985, there were 15 closed mills accounting

for 26.2% of the installed spindleage and 29.4% of the installed

loomage). Many of the Ahmedabad mills had started switching over

to blended/mixed varieties after 1976. The Ahmedabad mills have

been producing blended/mixed varieties of textiles in much larger

quantities and earlier than the All-India mills. By 1985, the

Ahmedabad mills were producing 35.5% of the total blended/mixed

cloth produced by the organised sector.

Table 4.10 gives the percentages of count-wise cotton cloth

production and exports by the Ahmedabad and Bombay mills. More

than three-fourths of the cotton cloth production of the

Ahmedabad mills is accounted for by higher-medium fabrics, and

fine and superfine varieties accounted for another 15%. While

94

most of the production and exports of the Ahmedabad mills are

concentrated in the medium categories, the Bombay mills are more

diversified. Th€ir exports have also been much higher than their

Ahmedabad counterparts. In 1980, the Bombay mills exported 28.8%

of their total cloth production whi}e the Ahmedabad mills only

2.8% (ITB, 1980). The exports of the Ahmedabad mills have been

discussed in detail in the section on marketing in this chapt~r

under product policy.

The extreme dependence of the Ahmedabad industry on a few

varieties is also brought out in Table 4.11, which shows that

poplins, pattas and shirtings together account for 81% and 83% of

the total wearable varieties produced by the Ahmedabad mills,

making them more vulnerable to changing demands, the only

redeeming factor being that these are staple medium-priced

varieties which enjoy a year-round demand. As we shall see later

on, these varieties were increasingly being taken over by the

powerloom sector which offered stiff competition in terms of

prices. In the absence of substantial exports, the production of

blended fabrics was taken up as a survival strategy by many of

the mills. The Bombay mills show a much more diversified mix in

terms of fineness as well as varieties of fabrics produced, both

wearable and non-wearable.

Data on state-wise and city-wise production of blended and '

cotton cloth is very limited, and is available only

blended/mixed cloth production in 1980 (Table 4.12). Here

non-

for

again, I

the Bombay mills are more diversified in their product-mix. In

Ahmedabad, while 65% of the production of these varieties is

accounted for by polyester-cotton and polyester-viscose-cotton

blends, and another 21% by cotton-viscose and modified viscose

blends, the diversity of production of the Bombay mills lS

again evident in this table .

. The Ahmedabad mills have been producing less grey cloth and

processing more and more through the years as can be seen in

Table 4.13. There has been a substantial increase in bleaching,

95

dyeing, mercerising, pre-shrinking etc. of fabrics, increasing

their value. The percentage of bleached fabrics increased from

52.2% in 1975 to 80.3% of the total cloth produ~tion in 1985,

mercerised fabrics from 24.6% to 62.6% and pre-shrunk fabrics

from 13.2% to 46.8% of the total pro~uction in the same period.

96

TABLE 4.6 PROFILE OF AHMEDABAD COMPOSITE MILLS

-------------------------------------Year Installed Spindle Installed LOOII Auto t X Auto

Spindles Utilisation Loo111S Utilisation Looms Looms -------------------

1975 2527011 77Y. 46673 79X 7953 17.0% 1980 2600373 82Y. 47638 91X 9046 19.0% 1985 Surviving Mills 2022972 NA 35510 NA 9045 25.5Y.

Non-surviving Mills 717084 NA 14754 NA 919 6.2X

Total 2740056 63Y. 50264 76Y. 9964 19.8Y.

------------------------------------------------------Note : * 10 of the 15 non-surviving mills and 8 of the 48 surviving mills in

1985 did not have any automatic looms.

Source : il Mill Statement, Bombay Millowners' Association, various issues. iil Ahmedabad Textile Mills Association IATMA) Annual Statistical

Bulletin, various issues.

97

TA!l.E 4.7 RAW WITERIAL CONSIJ'PTI~ BY TIE fH£DABAD KIU.S

( '()( les/Kgs)

AAW COTION STIR£ FIBRE .FII..JKMT ~

Iooian Foreign · Total Viscose· l1od. vis. Polyester Others Total Viscose Polyester Polyaaide Cupra. thers Total TOTAL

19751 Bales 739 7 71t6 Kgs. 125630 1190 126820 NA NA NA NA NA NA ~ NA

19801 Bales 814 815 Kgs. 138380 ~~0 138550 3645 1014 5891 3246 13796 120 3842 33 0 09 4104 156450

188.6) (8.8) (2.6) (100.0)

1985+ Bales 493 0 493 Kgs. 83810 0 83810 1185 729 6397 561 8872 67 60 171 13 6610 99292

(84.4) (8.9) (6.7) (100.0)

Note : il Responding Hills : 1975:55 mills, 1980:63 mills, 1985:45 mills, chiefly due to mill closures, iil Figures in parantheses indicate percentages to total consumption.

Source : AlMA Annual Bulletins, Various issues.

TABLE 4.8 YARN PRODUCTION IN n£ ~DABAD MILLS

(Percent)

------------------------------------------ -------------TOTAL l'ln. Kgs. 1s-10st 11s-c0st c1s-30st 31s-40st 41s-b0st 61s-80s*Above80st Total

------------------------------------------- -------1975 COTTON Production 118.0 2.1 8.2 43.1 39.0 5.4 1.0 1.2 100.0 Civil Del. 7.2 5.1 19.3 54.7 13.3 3.8 .1.5 2.3 100.0 Exports 0.0 0.0 0.0 o.o 0.0 0.0 0.0 0.0 0.0

1980 COTTON Production 110.6 1.5 7.4 51.8 34.4 1.9 2.1 0.9 100.0 Civil Del. 16.2 2.8 8.6 72..7 13.7 1.1 0.5 0.7 100.0 Exports 0.1 0.0 3.9 2.2 76.7 17.1 0.0 0.0 100.0

1980 NON-COTTON Production 0.1 0.0 15.4 8.4 24.4 36.5 13.8 1.6 100.0 Civil Del. 0.1 1.8 0.0 26.0 8.9 54.7 8.6 0.0 100.0 Exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

1980 BLENDED/MIXED Production 21.0' 0.0 0.1 12.0 36.8 38.7 7.0 0.6 100.0 Civil Del. 0.8 0.0 0.0 64.5 18.6 13.2 3.7 0.0 100.0 Exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

1985 COTTON Production 64.4 2.6 6.9 44.6 36.5 6.3 2.1 0.9 100.0 Civil Del. 19.6 5.2 4.7 63.4 23.3 3.3 0.1 neg 100.0 Exports neg. 0.0 0.0 100.0 0.0 0.0 0.0 0.0 o.o

1985 NON-COTTON Production 0.1 0.0 15.9 3.7 neg 34.6 43.0 1.9 100.0 Civil Del. 0.1 NA NA NA NA NA NA NA NA Exports o.o 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

1985 BLENDED/MIXED Production 15.1 0.0 0.6 4.2 11.3 69.4 14.2 0.3 100.0 Civil Del. 0.8 NA NA NA NA NA NA NA NA Exports 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ---------------------Note : Civil Del. : Civil Deliveries

* The lower the number of the count, the coarser the yarn and the higher the number, finer the yarn.

Source : ATMA. Annual Bulletins, vairous issues.

99

TABLE 4.9 CLOTH PRODOCTIOO IN Tf£ AH'IEDABAD MILLS

<Percent I ------

TOTAL Coarse l'led iu11 Mediu11 Fine Superfine Fents Total (Lower) !Higher)

Mn. Kgs. X X X X X X X

1975 COTTON Production 965.0 0.1 7.3 75.8 12.1 4.0 NA 100.0 Civil Del. 903.4 0.5 6.4 71.2 9.6 3.1 NA 100.0 Exports 51.5 2.1 16.9 61.2 8.1 4.5 NA 100.0

NON-COTTON Production 5.8 NA NA NA NA NA NA

BLENDED/MIXED Production 30.1, NA NA NA NA NA NA NA

1980 COTTON Production 796.3 1.5 6.8 85.8 1.0 4.9 NA 100.0 Civil Del. 785.2 1.2 5.8 78.0 0.9 4.1 NA 100.0 Exports 22.1 33.8 15.2 49.1 0.7 0.6 NA 100.0

NON-cOTTON Production 5.6 NA NA NA NA NA NA NA Civil Del. 5.2 NA NA NA NA NA NA NA Exports 0.4 NA NA NA NA NA NA NA

BLENDED/MIXED Production 251.0 NA NA NA NA NA NA NA Civi 1 Del. 204.1 NA NA NA NA NA NA NA Exports neg. NA NA NA NA NA NA NA

1985 COTTON Production 333.6 1.3 3.7 79.6 10.3 5.1 NA 100.0 Civil Del. 288.1" 1.3 1.3 76.1 4.6 7.5 NA 100.0 Exports 19.6 13.5 2.9 67.4 7.2 8.9 NA 100.0

NON-cDTTON Production 2.2 NA NA NA NA NA NA NA Civil Del. NA NA NA NA NA NA NA NA Exports ·NA NA NA NA NA NA NA NA

BLENDED/MIXED Production 260.7 NA NA NA NA NA NA NA Civil Del. NA NA NA NA NA NA NA NA Exports NA NA NA NA NA NA NA NA ---------Note : Civil Del. : Civil Deliveries Source . Ahmedabad Textile Mills Association IATMAl. Annual Bulletins, various .

issues.

10 0

TAKE 4.10 COTTO\l QOTI-1 Ff\ODLCTI 0\l PND EXFffiTS

m1:::DABAD PND E01PAY MILLS

?H"EDABAD F~-oduc t ion 197.3

.1980 1985

E:·:po1··ts 1. 97~ .. "i 1980 19\:B

E01BAY F=~-cx:luc t ion 1.9/"'5

1980 1985

1975 1980 1985

1 .0 1.4 1.3

3.8 31.2 13.4.

13.3 1t+.4 ~

22.8 19.4 ~

7.1 6.2 3.7

13.8 15.0 10.0

23.2 22.7 ~

41.2 42.7 ~

Medium <Highed

Y.

75.5 86.7 79.6

73.8 49.7

67 ·'+

41.7 51.8 ~

16.5 3:).8

f\Y-:1

< F'el-centages >

12.0 1.1

10.3

14.'+ 2.3 5.8

6.0 4 .Lj.

NC!

0.8 1.9 N~

Lj .• (l

4.6 5.1

7.2 1.6 8.9

15.8 6.8 ~

18.6 5.0 ~

Sc:urce : i> Irdian Te:·:tile R.tlletin, Anr-Ltall\l~trbel-, 1975, 1980. ii) ATI1~, Anl"""Ltal B..tlletin, 1985.

., .. '·,-.

--~·

~... ",-.·.,

101

0 :v

TABlE 4.11 VARIETY-\.IISE COTTON CLOTH CIVIL ~TIOO lF ll£ M'EDABAD 1\'ID EOtlAY ~

----------- --------------- ---------------------------Year L'tloties Sarees ltJlls, Langeloth Langeloth Shirtings ea.bric, Gaberdines, Denias Suting,FlaJl

voiles,etc. etc. etc. etc. etc. drills, etc. X X X X X X X X X X X

------AHMEDABAD Production 1975 3.5 0.3 1.3 61.7 " "" 21.3 2.6 2.1 0.0 0.3 ne· -"·C:

1980 1.6 1.2 0.8 66.5 2.2 14.6 7.4 0.6 0.6 3.0 ne 1985 NA ~;A NA NA NA NA NA NA NA NA NJ

Exports 1975 NA NA NA NA M NA NA NA NA NA Ni 1980 1.1 0.8 0.6 42.9 40.2 2.0 2.0 7.7 0.0 2.3 0. 1985 NA NA NA NA M NA NA NA NA NA HI

BOMBAY Production 1975 5.0 1.1 7.6 31.3 24.9 8.7 8.3 8.1 0.0 1.0 0.

1980 4.7 2.6 4.2 30.6 27.5 8.8 9.2 6.5 0.2 1.5 0. 1985 NA NA NA NA NA NA NA NA NA NA m

E:<ports 1975 NA NA NA NA M NA NA NA NA NA ~ 1980 0.8 neg 2.2 16.4 48.3 1.4 7.5 7.0 neg 9.5 4. 1985 NA NA .NA NA NA NA NA NA NA NA Nf:

--------------Source : Indian Text:le Bulletin, 1975 1980.

ATMA. Annual Bulletin, 1985.

(Percentages of total wearablesl ----

fusuti Other Total Non- ~

Dedsuti Wearables Wearables Wearables TOTrt. X X ooctlts. 0001ts. oocms.

t), 7 2.0 990335 24540 101~75

.).3 1.2 785978 12610 79823 ~ 1..1 NA NA M

~ ~ NA NA N.i 0.0 0.3 8529 14020 ,..,....C''"' cC: ... "'1'7

NA ~ NA NA ~

1.4 1.8 140980 96236 137216 1.7 1.8 704371 55594 759'165 ~ NA NA NA NA

M NA NA NA ~ 1.8 0.3 160697 48637 21:3:~

~ NA NA NA NA

TABLE 4.12 AHMEDABAD AND BOMBAY HILLS : BLENDED/MIXED CLOTH PRODOCTIOO. (19801

-------canoN WITH Pa..YESTER WITH On£R TO TilL

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - BLENDS Viscose 11od.Visc. Polyester Others Viscose Woo 1 Others PVC

% X X " X " X X X X ------------------~--------------A'BAD 11 10 45 9 2 neg 21 2 100

B'BAY 16 16 15 4 19 0 7 19 3 100 ----------------------------------------------------------------------------------------Nate : Mod. Vise. : 'Nodi f ied Viscose fabrics

PVC : Polyester/Viscose/Cotton blended fabrics A'BAD : Ahmedabad B'BAY : Bombay

Source : Indian Textile Bulletin, Annual Number, 1980.

TABLE 4.13 CLOTH PROCESSING IN THE Al-tiEDABAD MILlS

(Mn. Hts.l ------------

Bleaching Piece Printing Mercer ising Pre- Other Total Dyeing Shrinking Processes Production

1975 523 444 404 246 132 35 1001 Y. (52.2) (44.4) (40.4) (24.6) (13.2) (3.5)

1980 753 509 401 428 214 61 1053 Y. (71.5) (48.4) (38.0) (40.6) (20.4) (5.8)

1985 479 335 184 373 279 54 597 Y. (80.3) (56.2) (30.8) (62.6) (46.8) (9.11

------------------------------------------------------------------------------------------Note :• Figures in Parantheses indicate percentages to total production.

.. Total percentages exceed 100% as some of the cloth undergoes multiple processing.

Source: Ahmedabad T~xtile Mills Association (ATMAl. Annual Bulletins, various issues.

104

MODERNISATION IN THE AHMEDABAD MILLS

The composite mills of Ahmedabad augmented their Spinning,

Weaving, Processing, Engineering and other machinery through the

decade under observation. This included expansion of capacity,

renovation, replacement as well as absorption of superior

technology. Unfortunately, the census of textile machinery was

conducted only from 1977 to 1980, and the data on expenditure

incurred by the mills on machinery is available only from 1975 to

1980. In the absence of official data, much of the .·following

section has been based on perso~al interviews with mill

managements and technical personnel.

Table 4.14 gives the percent share of superior machinery in the

Ahmedabad composite mills. It can be easily seen that some

processes have received more preferential treatment compared to

others e.g. the ring-frames, cards, speed-fames, spooling/winding

and sizing machines have undergone a rapid change/conversion to

superior types of machinery. This has been mainly due to ~he fact

that capital expenditure in these priority areas have yielded

faster returns in terms of productivity and/or quality, a lmajor

concern under circumstances of scarce and costly capital.

Moreover, it can also be seen from the table that the new

additions have not necessarily been confined to superior or

automatic machinery. The mills have also continued purchasing

conventional machinery like pirn-winders, cone/cheese winders,

ordinary looms, blow room lines and draw-frames. These decisions

have been dictated by the individual mill's, product-mix and

since 75-85% of the total cotton cloth production of the

Ahmedabad mills over the decade has been Medium-A (Higher Medium)

varieties as we have seen earlier, the acquisition of ultra­

superior machinery was confined only to the few mills which

produced the fine and superfine varieties with cotton and blended

fibres.

105

TABLE 4.14

PERCENT SHARE OF AUTOMATIC MACHINERY IN THE

AHMEDABAD COMPOSITE MILLS. (1970 - 1980)

(Percentages)

-------------------------------------------------------.----------1970 1975 1980

Spinning

1. Blow-room lines 55.3 57.4 70.2 **

2 • Cards 16.6 41.1 86.9

3 • Combers 39 .. 6 46.0 48.3

4. Draw-frames 12.0 21 .. 6 ** 37.2

5. Speed-frames 11.2 41.1 66.9

6. Ring-frames NA NA 93.5 *

Weaving

1. Spooling/Winding 49.6 46.6 ** 100.0

2. Pirn winding 71.7 51.5 ** 44.2 **

3. Warping 16.8 17.3 22.6

4. Sizing 22.3 43.4 61.5

5. Looms 16.0 16.8 ** 20.5

-----------------------------------------------------------------* **

Includes ringframes converted to "top-arm" type spindles.

Accompanied by an increase in conventional machinery also.

Source : Indian Textile Bulletin, Annual Census of Machinery,

Various issues.

Since the Bombay mills have traditionally had a much more

diversified

possessed

mills 1n

product-mix than the Ahmedabad

more superior machinery in 1975

certain areas. Between 1975-1980,

mills,

than

for

they already

the Ahm~dabad

which data is

available, they spent 21% more on modernisation than the

Ahmedabad mills. The department-wise expenditure on machinery by

106

the Ahmedabad, Bombay and All-India mills

modernisation/rehabilitation for 1975-1980

presented in Table 3.4. While the Ahmedabad

expansion and 65% on modernisation, the

on

has

mills

Bombay

expansion and

already been

spent 36% on

mills (Mill

Statement, 1980) did not need much expansion. As we have already

seen, the Ahmedabad mills have been smaller in size than the

Bombay mills and have expanded gradually. Even today, the average

size of the Ahmedabad mills is smaller than their Bombay

counterparts. Expenditure on modernisation picked up after 1978

due to many factors, most important of them being the prosperous

period for ~extiles 1978- 1980, the availability of 'cheaper

funds for modernisation and the multi-fibre policy which allowed

the mills to diversify their product-mix into blended~mixed

varieties, though they have been woefully inadequate.

Based on inferences from ~epartment-wise expenditure on

modernisation for the four years 1977 - 1980 given in table 3.4,

the Ahmedabad mills initially concentrated on the processing and

spinning machinery. In the processing departments, amounts were

spent on renovation, replacement and expansion of capacity. The

new machinery acquired was both of the conventional as well as

the superio~ type, depending on the specific needs of the

product-mix.

modernisation

expansion was

Spinning also received attention, more

then in expansion. Next came

murginal but, some amount

weaving

was spent

in

where

on

modernisation and rehabilitation, and finally on engineering and

other machinery. The Bombay mills spent much more amounts on

modernising their weaving departments, followed by spinning. In

this sense, their expenditure pattern differed from Ahmedabad and

All-India mills, which were broadly on the same lines. The

results of the expenditure incurred in acquiring processing

machinery by the Ahmedabad mills can be seen in Table 4.13.

Except for printing, which depends on fashions, the amount of

processing done on fabrics can be observed to have increased

drastically over the decade 1975 - 1985, increasing greatly the

value of the fabrics processed instead of being sold in the grey

stage.

107

It is generally felt by textile experts that the modernisation

programmes undertaken by many of the Ahmedabad mills have been

inadequate and ad hoc, with short-term planning instead of being

part of a long-range plan formulated to modernise department-wise

from the blow-room to the loom-shed. In part this was due to the

fact that most of the mills were so old and the machinery so

obsolete that the needs of finance were very high and the means

at the disposal of the mills were too few for a massive

reconstruction. Help from policy, though often recommended by

various government committees and groups, apparently came too

late and in insufficient quantities to be really effective for

them. Thus it seems that in most mills modernisation was

undertaken either to expand some sections or balance the

machinery due to changes in other departments or as a result of

change in product-mix. In many instances, however, the mills were

not able to sustain the production or sales or both of the new

product-mix' and either reverted back to the old varieties or went

sick trying to combat high inventories, larger working capital

requirements and interest charges.

108

MARKETING AND DISTRIBUTION IN THE AHMEDABAD MILLS

The organis~d textile industry is gradually being edged out of

the domestic market by the decentralised sector and is finding it

most difficult to market its products. Market oriented thinking

is a necessity in today's competitive world, where there are too

many goods chasing too few customers. It is the market-place, not

the factory, which ultimately determines which companies will

succeed, and companies with "marketing myopia" pay dearly.

Marketing is a difficult art-psychological forces play a large

role, marketing expenditures affect demand and costs

simultaneously, marketing plans shape and interact with other

business fuqction. plans and marketing decisions must be made

quickly in the face of insufficient information about processes

that are dynamic, lagged, stochastic, interactive and very

difficult to assess accurately.

The marketing environment consists of a macro environment and a

micro environment. The macro environment includes broad trends in

the demographic, economic, political/legal, social/cultural,

technologicml aspects which can have profound impact on the

company's market. These trends have already been described in

Chapter II on the policy and market environment for the textile

industry. The micro environment consists of the customers, the

competitors, the suppliers, the marketing intermediaries, etc.

The company needs to know, for example, how many households plan

to buy its products, who buys, what do they buy, what are their

reactions to;changes in quality and price, where do they shop,

what are their concepts about the company's competitors, the

potential influence of advertising, sales promotion, personal

selling, etc. on consumer choice decisions.

With few exceptions, for most textile mills in India, marketing

has mostly meant distribution. Marketing of textiles in India in

the real sense of the word has been a very recent phenomena and

that too on a very limited scale. On the other hand, it should

also be pointed out that some pioneering mills in the area of

advertisement and promotion in the 1950s to 1970s are now lying

10 9

either sick or closed. Two such examples are the DCM group and

the Calicp Mills. However, this only brings out the fact that

proper marketing also includes intensive market research, follow­

up measures and on optimum pricing policy besides promotional

activities like advertising, retailing and fashion shows. Very

few mills today have an extensive marketing network or provision

of substantial advertising budgets to successfully respond to the

changing economic and marketing environment for textiles. Though

awareness has been steadily increasing, far too many mills are

still dependent on the distribution channels for marketing.

The Evolution of the Textile Distribution System.

A review of the development of marketing practices followed in

India and Ahmedabad in the last century and how they evolved can,

in part, explain the present textile marketing practices and put

them· in their proper perspective. As mentioned earlier, marketing

of textiles in India in the real sense of the word has been a

very recent phenomena and that too on a very limited scale; for

most mills marketing has been limited to distribution. Over the

years, a vast network of wholesalers, semi-wholesalers, retailers

and commission agents has evolved, responding to changing times.

A century ago, nearly 60% of India's domestic fabric

was imported from abroad. Calcutta was the chief

consumption

centre for

wholesaling of imported cloth. Of the domestic production, 71%

was produced on handlooms and only 29% by mills. Bombay w?s the

next important centre where wholesaling of domestic mill-made

fabrics mostly coarse fabrics produced by mills in Bombay,

Ahmedabad, Kanpur and other places took place. It was also the

main centre for export of cotton and yarn. As for handloom

fabrics, 15-20% were estimated to be consumed in the producer's

home, 10% exported and the rest were marketed within the country,

most of it being sold within the region itself because of the

traditional character of the consumer and specific modes of

attire limited to the region.

While handloom production remained steady at around 800-lOOOmn.

yds., production of the mill sector increased from apptox. 300mn.

yds to 4000mn. yds between 1896 and 1950. By then, imports w~re

negligible and nearly 74% of the domestic production was mill­

made, only 17.5% handloom-made and 4.5% powerloom-made out of a

total availability of about 4500mn. yds. The average cost of

cotton fabrics in 1950 was 12annas-7paise for coloured cloth.

Rayon fabrics, a luxury cost Rs.l-1 as per yard. Average gross

annas margins of traders were estimated between 5-10% upto 1940,

profits were small in relation to the risks involved and traders

held large accumulated stocks. Stocks of cloth maintained for 5-6

years was not uncommon before the war. Traders carried 3-4 times

the unsold stock carried by the mills which depended heavily on

the trade to finance the trade and providing working capital.

During the war years, there was frequent accumulation of stocks

and the distributive agencies undertook this burden. In 1937, for

example, which was a difficult year for mills, 10,000 bales on an

average remained unsold with the Bombay mills against 55,000

bales held by them on behalf of dealers as sold but u~delivered.

In 1938, a more difficult year, the figures were 4000 and 84000

bales respectively. There was a gradual reversal of trends during

the wars. The supply position was no longer easy and carrying of

stocks afforded almost certain prospects of appreciation for the

mills. Sales ceased to be a problem even for the most efficient

mills and the traders were deprived of most of their bargaining

strength. This state of affairs continued through the 1940s when

the Swadeshi Movement encouraged the use of domestic cloth. The

partition of India took away 70mn consumers of cloth and most of

the cotton-growing areas. This was a very difficult period for

the mills and the traders regained their original powerful I

position.

Marketing Functionaries

Traders of fabrics are either wholesalers who buy and sell

fabrics in packed bales, semi-wholesalers who purchase packed

bales either from wholesalers or mills and sell 'Thaans' to

retailers after opening the bales, and retailers who sell to the

lll

consumers in piece-lengths of their choice. Non-trading or

facilitating intermediaries bring the trading intermediaries

together, sometimes guaranteeing payment for the goods. They

include commission agents, indenting agents, adatiya~ and

brokers, operating for a commission/brokerage on sales effected

through them. There are various permutations and combinations of

the distributive chain chosen by mills and often mills employ

different chains for different varieties. The length of the

distributive chain varies from MILL-COMMISSION AGENT-WHOLESALER­

BROKER-SEMI WHOLESALER-COMMISSION AGENT-RETAILER (which is the

costliest but offers widest geographical reach) to MILL­

COMMISSION AGENT-RETAILER (which is shorter and least costly but

offers limited reach).

In orper to market its production, the mills in Ahmedabad make

use of a distributive system which broadly represents the all­

Indian system, and which has been operating and evolving for more

than a century. The sole-selling agency system has vanished and

wholesalers also are a vanishing breed, many of them turning to

semi-wholesaling functions also. Most of the mills now.have their

own ¢salesman• or sales executive who is in charge of the

marketing functions. Very few mills as yet have the post of

marketing managers or an elaborate marketing set-up. Since having

one retail. shop was statutory until recently, many mills in

Ahmedabad had a retail shop within the premises. While some mills

had their retail outlets in the commercial areas, very few had

multiple retail shops or retail outlets through authorised

dealers and ·fewer still as a national network. The Calico mills,

now sick s~nce a long time, was the leading mill in terms of

marketing and besides advertising, held its own fashion shows all

over the country, and employed professionals for market res~arch.

Of the total cloth production by the Ahmedabad mills, nearly 70%

has been estimated to be distributed through the local market and

the rest through indenting or consignment system. There are

nearly 1800-2000 wholesalers located mostly in the New Cloth

Market, about 2000-3000 semi-wholesalers located mostly in the

Dhanalaxmi, Mahaveer, Bombay and Panchkuva markets, and 4000-5000

112

retailers spread all over the city, but concentrated in the

Panchkuva, Prem Darwaja and Ratanpole markets. While the·

commission agents who are the purchase agents of outstation

dealers take physical delivery of goods at a .commission of

around 1.5%, the brokers merely liase between the buyer c1nd

seller without in any way influencing the terms of trade or

undertaking either possession or ownership of the goods for a

brokerage of about 0.5%. In many cases, Commission Agents operate

as wholesalers and semi-wholesalers also, depending on the market

trends and av~ilability of finance. The average annual turnovers

of the Bombay wholesalers have been much higher than the

Ahmedabad wholesalers (ATIRA, 1990)and most of them are more

dynamic and risk-taking than their Ahmedabad counterparts. Many

of the managements of the Ahmedabad mills held that their efforts

at increasing the sale volume and at introducing new products

into the market were hampered by the conservativeness of the

Ahmedabad merchants. According to the merchants, the rates of

state-imposed octroi, sales, entry tax and other levies are very

high compared to the centres in other states. Moreover,

industries using industrial fabrics, non-woven fabrics or gee­

textiles, and the readymade garment industry are mainly situated

out of the state. The transport cost and the high levies for all

incoming and o~t going textile products (except cloth) ~ender the

products of the Ahmedabad mills uncompetitive in the outstation

markets.

The Sales Organisation in the Mills

I

Most of the European management controlled mills like the Finlay

Group, Elgin Mills, Cawnpore Textiles, Atherton West Mills, some

Indian managed mills like the Swadeshi Mills, and most of the

Ahmedabad mills formerly relied on the sole selling agency system

for sales, which is now redundant. The agents were paid about

1.5% commission on production quantity or sales. These selling

agents used to finance the mills through deposits. They were

responsible to the mills for monthly payments, and in. case of

delay, would also finance the wholesalers. This eased greatly the

working capital situation of the mills which depended on priv~te

113

funds and public deposits in the near-absence of organised

banking facilities for finance. Some mills directly sold to the

wholesalers through commission agents. The Birla, DCM and .Tata

groups followed.the practice of ex-factory sales for ready stocks

by Agents in mixed bales of various qualities. Upcountry sales

were made either on consignment basis or by appointing Indenting

agents, or through local commission agents called ¢Adatiyas•.

In Bombay, the wholesalers were concentrated in the Moolji Jetha

Market. In Ahmedabad, the traders formed an association called

the Maskati Market Mahajan, which regulated all the trade and

resolved disputes. In Ahmedabad, mills generally being smaller in

size,

Hence

were willing to handle small orders in wider

wholesaling never quite assumed the high

assortments.

degree of

specialisation of the Bombay traders. The wholesalers because of

their strong bargaining position started acting as originators of

production decisions and entered into forward contracts. 1There

were close connections with the production departments of mills

and they could even change production schedules in direct

consultation with the weaving master. The role of the traders in

India as financiers of the mills after the production and packing

of cloth gave them an upper hand.

The dependence of the mills on the trade channels in the days

before the wars should be viewed in the context of a period when

systems of credit were primitive, and so were communication and

transport. All upcountry sales carried a credit of 3-4 months.

The importance of the wholesalers thus becomes clear. Besides

acting as financiers and stock-holders, they also provided market

research information on the mill's own fabric as· well as

production quantities, qualities, schedules, and prices of

competitive mills. Mills were complacent about sales and profits.

The days before 1930 were described by Sir Cusrow Wadia as " __ _

halycon times for us all steady profits, steady labour, no

strikes, and above all, no stocks.•• (Wadia, 1940) ..

The weaknesses of the traditional selling practices were acutely

felt after the Second World War, when the cumulative effects of

government controls over production and keen competition

114

manifested themselves in huge stocks and decreasing prites.

Management started paying more attention to sales and new

approaches were tried, especially by the more progressive mills.

The beginnings of direct sales to retailers and to consumers in

the form of the mills' own retail shops were made during this

period. The importance of brand names also emer~ed and incr~asing

attention was also paid to packing and finishing of fabrics. New

modes of publicity like exhibition trains, display of publicity

posters, postcards inviting comments from consumers were adopted

by a few mills.

The increasing urbanisation and faster channels of transport and

communication gradually weakened the hold of the local Adatiyas

or agents on whom the upcountry merchants relied upon to deal

with the wholesalers of mills' fabrics. The impact of faster

transport was not only felt in the shortening of time for the

goods in reaching the final consumer, but also in the gradual

evolution of a national market for all types of varieties as

against traditional regional varieties. The proportion of 1 urban

population increased from 9% in 1881 to 18% in 1951 and 26% in

1991.

Today,

mills

in

are

the face of fierce competition in a buyers'

trying to shorten the distributive chain as

market,

much as

possible to minimise expenses and establish closer contact with

the end-consumer. They are increasingly selling directly to the

semi-wholesaJers, retailers and manufacturers of ·ready-made

garments and using cheaper non-trading intermediaries. Just as

the system of sole-selling agents (dalal system) was replaced by

the practice of selling directly to wholesalers, there has been

an increasing tendency to circumvent the wholesalers who have

increasingly begun to take on semi-wholesaling services for

powerlooms. Mills have been trying to shake off their dependence

on middle-men. Cost-wise, it has been proved that the textile

distribution costs estimated between 27-35% are very reasonable

compared to other countries (NCAERT, 1978, liM, 1982 and ATIRA,

1990). In any case the fierce competition in the market is the

most effective deterrent to excessive margins. The structure of

115

the present textile industry is highly fragmented and so is the

structure of the distributive trade with a large number of

traders competing amongst themselves without any barriers to

entry or exit. The fact that relativelj more expensive systems

continue to be in operation suggests that they play a role which

cannot, as yet, be replaced. Small or sick mills already

financial problems are not in a position to deal with so

semi-wholesalers or retailers directly and carry

inventories.

Limitations of the Distribution System

facing

many

heavy

While there is considerable identification of mutual interests

between the mills and the traders, there are certain functions

which cannot be fulfilled but the middlemen in the context 9f the

changing marketing environment in the country. An effective

marketing programme should consist of the following essential

elements :

i) A well laid-out product policy keeping in mind the company 1 s

resources and the changing market conditions;

ii) A realistic and optimum pricing policy which takes into

account the competitive forces in the market as well as

yields maximum returns;

iii) A promotional programme which effectively backs up the

company 1 s products in the market;

iv) A market research system and field-marketing organisation

which constantly provides feedback on the company 1 s own as

well as competing products, new developments, new markets,

general trends in the market and follow-up of the company 1 s

promot~onal activities; and finally

v) An efficient market information system.

With very few exceptions, most of the textile mills in India

depend on their traders and salesman for providing all the above

marketing functions. While their long-standing trade connections

and experience in handling textiles are of great value in

providing certain marketing services like financing, collection,

ll 6

transportation, warehousing and distribution, these functions

alone are inadequate in ensuring effective marketing. In the

context

growing

mills

of the emergence of a buyers' market in

competitions from within and outside the

need to implement a marketing programme

textiles

industry,

with all

and

the

the

constituent elements described above. This does not mean that

modern mark7ting should do away with the middlemen and resort to

direct selling but it should devise means and methods to fill

some gaps within the framework of the existing marketing system

through appropriate management policies so as to make it more

responsive to the changing environm€nt. Some of the gaps and

inadequacies of the marketing activities of many of the Ahmedabad

mills can be grouped under the following heads:

1. Product Policy

2. Pricing Policy

3. Promotional Programmes

4. Market Information System

1. Product Policy : Most of the mills in Ahmedabad decide their

product-mix in consultation with the wholesalers or semi­

wholesalers, based on their recommendations on constructions,

colours and designs. Except for the 'premium' sorts, or sorts for

which the mill has a brand image in the market, it is usually

the trader who has the upper hand. Though most mills have a

regular production of its particular standard varieties, the rest

of the loom programming is often subject to short-term changes

depending on the season or fashions. Very often, this results in

the production of large varieties of fabrics of shorter

production runs with higher costs. This short-term policy

followed by most of the Ahmedabad mills has been defended by the

mill-managements on the grounds that the traders would not lift

the goods produced by the mills without consultations with them

as they would not sell in the market. There are very few mills

having certain 'premium' varieties which can sell themselves,

even in Bombay. Those mills which have traditionally been

producing varieties which have been taken over by the powerlooms

have relatively lesser choice in formulating long-term product

117

policies unless they are market nichers specialising in a few

varieties for a specific target market, with an established brand

image. Developing a successful brand image is not necessarily an

expensive and painful process. It means finding a target market

and supplying consistent quality for the price. Thus, for

example, a low-priced poplin manufactured for .the rural market

may be of inferior quality commensurate with the price but that

quality should be consistently maintained. While it is true also

that dependence on a few varieties is dangerous, economies

affected through production of a few varieties in term of

planning and costs are substantial. If it is supported by an

efficient market information system, the mill can have enough

warning about changing the product-mix in the long run.

Contrary to the general impression, some mills in Ahmedabad have

been pioneers of new varieties. Denim was first introduced in

India as early as 1970s by the Aryodaya Mill of Ahmedabad which

also sold denim garments in its retail shops. The Arvind Mills

was amongst the first in India to introduce and specialise I

specialised

in

high quality ¢butta' voile sarees. Some mills in

woven jacquard bordered sarees, which were later reserved for I

handlooms. The Calico Mills introduced the ¢carbonised' process

and other synthetic sarees and dress materials with heavy

promotional backup in the form of advertising and fashion-sl1ows

all over India. The Sarangpur Mills was amongst the first in

India to sell directly to manufacturers of ready-made garments

internationally

the Ahmedabad

mills, brought

as well as nationally. The onset of sickness in

textile industry, especially in the progressive

an end to the introduction of new products.

Innovative marketing should be backed by accurate market research

and pricing systems to be successful.

By and large, the Ahmedabad mills seem to have responded to

changing consumer preferences 1n terms of fibre. While

consumption of cotton fabrics in India reduced from 88% to 70% in

quantity and from 65% to 38% in value over the decade, people

have increasingly been preferring non-cotton and· blended/mixed

fabrics. We. have already seen earlier in this chapter the

118

product-mix changes undertaken by the Ahmedabad textile industry

in the decade 1975-1985. Though the total production has

decreased from around lOOOmn mts to 600mn mts, the industry has

shifted toward blended/mixed fabrics and in 1985, produced 35.5%

of the total All-India organised sector production of these

fabrics, though mainly in the medium-count varieties. Fibre-mix

data available only for 1980 shows that 45% of the blended/mixed

fabrics in Ahmedabad were polyester-cotton, and 21% were

polyester-viscose-cotton blends. However, compared to the

Ahmedabad mills, the Bombay mills have been more diversified in

their product-mix. By 1988, the last year for which data is

available for Ahmedabad, though total production was further

reduced to 433mn. mts. due to closure of many mills. Cotton,

blended/mixed and non-cotton fabric production accounted for

50.2%, 48.5% and 1.3% respectively in 1988.

Within cotton fabric production, the bulk of the industry's I

production has been higher-medium quality fabrics. Nearly 85% of

the wearable varieties of cotton cloth production of the

Ahmedabad mills is accounted for by poplins and shirtings, and

both these varieties are produced by powerlooms at much lower

cost, providing stiff competition (Table 4.11). The Bombay mills'

production of poplins and longcloth accounts for 57% of the

total, the rest being a diversified mix. The production of non­

wearable fabrics accounted for only 1.5% to 2.5% of ·the total

production of Ahmedabad mills in 1975 and 1980, while the

proportion was much higher, at 7.4% to 8.5% for the Bombay mills.

A progressive company is always in search of new and remunerative

markets. Exports are one such avenue. The Ahmedabad mills exports

have been meagre and erratic, though mills have started taking

interest in the last few years to take advantage of the various

export inGentive schemes offered by the government. Except for

the 7 mills of the Lalbhai Group, which have established a common

Export House in Bombay and have been consist~ntly exporting

between 3% to 12% of their production, and a very few other big

mills, most of the exporting mills fiave been active only after

1987. Until then, exports ranged between 2.4% to 6.4% of the

119

total cotton cloth production of Ahmedabad, three-fourths of

which belonged to the higher-medium category mostly in grey form.

In 1988, the last year for which figures are available, and the

year in which many mills started exporting, exports were 17mn.

mts. or 8.6% out of a total production of 198mn mts. The break-up

of exports of cotton, blended/mixed and non-cotton fabrics was

88%, 10% and 2% respectively for the Ahmedabad mills.

Though getting into exports and maintaining them needs constant

vigilance and care regarding quality, export marketing should be

given serious consideration by mills when they are gradually

being edged out of the local market. Proper market research would

bring out products which an individual mill can produce

commensurate with its available machinery and which it can sell

in the international market. Interviews revealed that most mills

cannot afford Export Houses in Bombay and face many difficulties

in handling exports. The other alternative of selling through

merchant exporters leaves very low margins or none.

2. Pricing Policy : The use of a pricing policy as a major tool

to maneuver the marketing of yarn or cloth is not yet very

prevalent in the organised textile sector. An effective and' well

thought-out pricing strategy backed up by a proper product policy

and market research system which can help to find a target market

can not only lead to higher profits, but also help to boost up

its sales and improve the image of the mill in the market. In

monetary terms, if an average mill with a production of 60,000

metres per day can obtain only 10 paise more per metre, it can

earn an extra Rs.6,000 per day, or Rs.l50,000 per month or

Rs.l.8mn pe~ year. The small mills, prices are often set by the

top management in consultation with the wholesaler and the

¢salesman• or sales executive. In larger mills, pricing is

handled by the sales executive in consultation with the

divisional managers, but the top management sets the general

pricing policies and objectives and often approves the prices

proposed by them.

Generally, the prices for particular varieties are based on the

price fixed by the ¢leader', except for exclusive varieties. In

120

Ahmedabad, being a more conservative centre compared to others,

mills have their fixed image in the market for their standard

varieties and it is a more difficult"and long-drawn out process

to change it. Again, the trade has full knowledge of the mills

financial condition and takes full advantage of its weakness.

Sick mills have perforce to give into keep the working capital

circulating, which leads to a vicious circle of lower margins-

lesser profits-financial stringency-immediate need of working

capital-distress sales. Besides the monetary aspect, information

on domestic and international prices of the varieties sold by the

mill as well as its competitors would go a long way in helping to

formulate the mills optimum marketing strategy helping it to find

new varieties it can produce, commensurate with its .financial

and mechanical capabilities. It can also help in targeting the

market-rural, urban or export. Though data availability for

marketing in India is extremely meagre, estimates provided by the

Textile Committee Surveys on Consumer Purchases of Textiles may

provide broad guidelines on which it can further concentrate its

efforts. The mills are facing severe competition from powerlooms

and unless they make full use of their strengths in terms of

organisation and machinery, select target markets and specific

varieties which cannot be produced and sold by the competitors at

the required quality, volume and price, they will be fully edged

out of the market.

3. Promotion Policy : Modern marketing strategies not only

include the development of company's products, pricing and

distribution, but

various activities

also promotion. Promotion

the company undertakes to

stands for

communicate

the

the

merits of its products and to persuade target consumers to buy

them. They include advertising, sales promotion, publicity public

relations and personal selling. In the context of a developing

economy like ours, producers have to try very hard to find a

place for their products in the consumer's purchase basket. As we

have seen earlier, the organised sector has been facing stiff

competition not only from consumer durables, but also from

powerlooms. Inflation has not only b€en responsible for

increasing the costs of production, but also for lim1ting the

121

purchasing power of the consumers. An aggressive promotional

policy would help the mills to push their products through to the

target markets so that they can survive profitability.

Only a few leading mills in India and hardly any in Ahmedabad

have been following a well planned promotional strategy for

marketing. In Ahmedabad, the Calico mills was the foremost. It

had a full-fledged advertising campaign backed by nation wide

retail outlets and fashion shows. It also followed them up witl1

professional agencies assessing consumer acceptance. Others

included the Mafatlal Group's New Sharrock Mill, the Tata Group's

Advance Mills and the Arvind Group of Mills. Each of them

advertised their products as part of a group and not

individually. Thus, for example, it was the Mafatlal fabrics that

were advertised together, which included all the mills in the

Mafatlal group. Thus, formerly, only mills which were part of a

larger group undertook promotional activities. Then in the 1970s, I

the Aryodaya mills started advertising its Denim range and the

Sarangpur mills its sales to Bonds, the international readymade

manufacturers. Then BVM came up with the corduroy campaign and

other mills like Maneklal Harilal, Rustom, and Mahendra joined

in. Apart from Calico, the other mills mainly indulged in

advertising activities and only lately have been promoting

through fashion-shows. The promotional budgets of most of the

mills even in India forms a very small percentage of the sales

revenue.

The mills should not only promote their brands at the consumer

level, but they should also adopt promotional policies of pulling

their products through the distribution channel. The promotion of

the products 1s by and large completely delegated to the

middlemen by the textile mills, mostly without providing

additional funds earmarked for this purpose. The middlemen also

do not possess adequate staff to undertake promotional

activities. Thus once the products leave the mill premises their

further movement upto the consumer is entirely left to the

initiative of the individual cha~nel members. With a few

exceptions, the retailers do not seem to identify their interests

122

with tl1ose of the mills and by and large except for well-known

varieties and specialities, textiles become generic products at

this level. Mills could devise and implement promotional schemes

to enthuse and get active cooperation from their retailers. This

would necessitate a network of field staff which may be involved

with both follow-up and market research activities. By and large,

most mills seem to be shying away from promotional activities of

this kind, which would prove most rewurding in the long run.

4. Market Information System : A marketing information system is

a continuing and interacting structure of people, equipment and

procedures to gather, sort, analyse, evaluate and distribute

pertinent, timely and accurate information for use by marketing

decision makers to improve their marketing planning,

implementation and control.

The need for efficient planning, implementation and control of

marketing operations make the development of an effective market

information system an important prerequisite for effectively

marketing the company's products. In a rapidly changing

environment, the mills would need to know the changing consumer

tastes and preferences, new market openings, competitive

developments with regard to prices and products, knowledge about

the movements of their own varieties in the markets and their

strengths and weaknesses as perceived by the consumer in terms of

quality. Moreover, planned development of the economy has opened

up new markets in the urban and rural areas as well as in foreign

countries.

At present, most of the textile mills 1n the country, and more so I

in Ahmedabad, solely depend upon the middlemen to provide this

sort of market information. Though the middlemen might apparently

have successfully carried out these functions in the past, under

the present circumstances they are inadequately equipped to play

this role. Through their long experience in the trade they can

and do sense .the various developments in the market and convey

them to the mills, but most of their assessments of market trends

are based on intuitive knowledge rather than hard facts. A total

12 3

dependence on this source of information may lead to erroneous

conclusions

the mills

which have sometimes even prove very expensive I

in terms of product/market development or choice

for

of

product-mix and under or over-estimation of market acceptance of

their varieties and lost opportunities. This is due to the

marketing gaps-informational, organisational and promotional­

that the present system in most mills creates in the marketing of

textiles.

Trends 1n the marketing environment should be assessed and

analysed through a simple or elaborate internal reports system,

the marketing intelligence system and the marketing research

system consistent with the extent of the individual mill's needs.

The information is conveyed to the marketing managers to help

them in analysing, planning, implementing and controlling their

market strategies. The most basic information system used by

mills is the internal reports system which includes reports on

orders, sales, inventory levels, receivables, and so on, by which

they can s2ot problems, delays and opportunities. In most mills,

the marketing intelligence system is very informal and is

obtained either by word of mouth or trade publications. More

progressive mills have a trained and motivated sales force to

improve the quality and quantity o! marketing intelligence in

addition to the distribution channel. For its market research

functions, the company can either have its own marketing research

department which is very rare, or hire professionals or semi­

professionals for the purpose. The most common functions are

market share analysis and potentials, competitive product

studies, pricing studies, determination of market

characteristics, sales analysis, market trends, short and long­

range forecasting and such like. The scale of operations, the

kind of product-mix, the nature of the markets for its products

and such other considerations will determine how elaqorate the

marketing information network should be. Again, the mills can

start at an elementary level, which can become more elaborate

with the passing of time and a widening of the markets for its

products.

124

We thus see that there is a great diversity in the marketing

practices of different mills. While the entire textile mill

sector is passing through a period of crisis, some of the more

progressive, larger and well-financed mills with a marketing

organisation have been able to face the situation relatively

better, though the earnings of most of them have been declining.

Some well organised mills are able to survive successfully even

with traditional systems of distribution, though in the case of

these mills their selling through middlemen .is usually supported

by well-organised sales departments and substantial, though

primitive promotional activity aimed at creating a brand image in

the market. What is needed in the present context is a cohesive

mix of product differentiation, pricing, promotion and

distribution systems based on a market information system with a

degree of elaboration that is commensurate with· the company's

scale of operations and its resources.

Though the Ahmedabad mills were pioneers in introducing new

varieties, it seems that they were not able to sell many of the

efficiently enough to penetrate and sustain the market.

Apparently this has be~n due to various factors like exclusive

dependence by most of the mills on the distribution channel, not

enough market research to find new markets or .to follow-up on the

existing ones, pricing its products mainly on a cost-plus basis

after taking into account the prevailing business cycle, and

employing primitive and basic promotion techniques. Marketing is

a very potent weapon to fight a competitive market and an

important determinants of profitability in the kind of

environment prevailing in the Indian economy for textiles.

125