Textile Industry And The Power Blackout Commerce Essay

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The history of textile began in Eden where Adam and Eve nakedness revealed to them upon eating forbidden fruit. Soon after knowing this both started covering themselves by sewing fig leaves. And today this requisite has become the most important economic sector especially in states like Pakistan. Before having detailed look on Pakistan's textile industry it is imperative to know its meaning. The word textile is a noun means a fabric made by weaving, knitting, etc or cloth. Textile industry includes cotton yarn, cotton cloth, garments, bed wear, raw cotton, knitwear and other textile materials. [1] 

Boost in the cotton production and development of textile industry has been impressive in Pakistan since 1947. Cotton - bales increase from 1.1 million bales in 1947 to 10 million bales by 2000. Number of mills increased from 3 to 600 and spindles from about 177,000 to 805 million similarly looms and finishing units increased but not in the same proportion. Pakistan's textile industry experts feel that Pakistan has fairly large size textile industry and 60-70% of machines need replacement for the economic and quality production of products for a highly competitive market. But unfortunately it does not have any facility for manufacturing of textile machinery of balancing modernization and replacement (BMR) in the textile mills. We need to think about joint ventures for the production of complete spinning units with china, Italy and production of shuttle less looms with Korea, Taiwan and Italy. Reflecting on the state of affairs, Abid Chinoy, Pakistan cloth merchants Association (PCMA) Chairman, Appreciated government's efforts to encourage new exports and finding new markets, which need aggressive export marketing. The steps taken on the monetary front, such as the frequent devaluation of Pak rupee in terms of dollar could not improve the cost competitiveness of exportable products due to increase in prices of the local and imported inputs of the local textile industry. During the period 1973 to December 1992, some 71 spinning units with 1,136, 835 spindles, 6,600 rotors and 7,329 looms were closed down. In 1992, a foreign consultant form was hired by the government to look into the stagnate conditions in the local textile industry. One of the observations of the foreign consultant was "Pakistan has failed to make real progress in the international market and is being over taken by many of the neighbouring competitor countries. The rise in export of value-added products from Pakistan was another point of encouragement for the textile sector. "The export of value-added products rose to 57.4% from 53.9% in 2002 which is clear sign that we are moving in the right direction, "said the Chairman of all Pakistan textile mills association. The trade policy is considered an acceptable paper, but in the industry does not fine anything that could lead to a high level exports achievement and remove trade imbalance. Pakistan's textile sector earned US$5.77 billion during the 2003 year, compared with US$5.577 BILLION OF 2000-2001 indicating a growth of 0.69%. The total exports of textile sector in 2004 were US 5.7 billion which shows 2.5% growth it increase to 4% growth in 2005 as compared to 2004.The textile sector shows 8% negative growth in 2006.T he negative growth continue in 2007 also with the value of 5%.The textile sector shows 15% growth in 2008. Now we will discuss the main reasons of crisis in textile industry detail. [2] 

The textile sector enjoys an essential position in the exports of Pakistan. In Asia, Pakistan is the 8th largest exporter of textile products. The contribution of this industry to the total GDP is 8.5%. It provides employment to about 15 million people, 30% of the country workforce of about 49 million. The yearly volume of total world textile trade is US$ 18 trillion which is growing at 2.5 percent. Out of it, Pakistan's share is less than one percent. The progress of the Manufacturing Sector has been given the highest precedence since Pakistan's founding with major stress on Agro-Based Industries. For Pakistan which was one of the leading producers of cotton in the world, the development of a Textile Industry making full use of its abundant resources of cotton has been a priority area towards industrialization. At present, there are 1,221 ginning units, 442 spinning units, 124 large spinning units and 425 small units which produce textile products. [3] 

TEXTILE INDUSTRY ANALYSIS:

The current scenario posses challenges firstly to sustain its global positioning and secondly to increase its market share by both increase in volume as well as increase in unit values. The unit value can be increased only through marked improvement in quality, market tie-up, image building and change in business philosophy. This requires up gradation in resource development both in manufacturing and marketing. The focus should be on R & D, technical innovation, product development on one hand and brand & market development on other with the goal of moving up in the global textile value chain. [4] Pakistan's situation is fragile because they are not moving forward in fact they are setting back when it comes to technology. Pakistan has so far failed to adapt to changes and suffered consequences by losing their share in world textile market.

Pakistan is the fourth largest cotton producer in the world. Because of its plentiful, indigenous cotton supply, the textile industry is central to the Pakistani economy and is both a source of employment and a source of exports. Today, textiles account for 38 percent of total manufacturing and 8 percent of GDP. It consists of 40 % of Pakistan's employment. In spite of the significant role textiles play in the economy, most textile manufacturers are cottage or small-scale industries. Pakistan relies on outside manufacturing capability and must purchase most of its equipment abroad.

Cotton and yarn are Pakistan's main textile exports. The textile industry accounts for more than 60 percent of Pakistan's total exports. The All Pakistan Textile Mills Association is the institute that legalizes the industry, which is currently facing a number of difficulties, including the need to improve quality.

Pakistan now faces more competition from China, India, Indonesia and Turkey and so it must compete with them in conditions and comparative advantage. But the condition of Pakistan is bad because of various reasons because of which they are losing their share. [5] 

Today Pakistan has an integrated textile industry comprising cotton spinning (yarn), cotton weaving (cloth), cotton fabric, fabric processing, home textiles, towels, hosiery and knitwear and Apparels. These are manufactured both on large scale as well as in small & medium cottage units all over Pakistan. Back in history textile was for Faisalabad only but now it is scattered all over Pakistan [6] 

BACKGROUND:

Textile industry is of interest to me basically because my family business is from this industry. My dad owns a small scale factory of manufacturing sports wears and distributes it to different schools and sports institutes of Pakistan. After my MBA, I joined my dad's business and starting helping in increasing the customers to gain further revenue. The major parties that we are working with are Atchison, Punjab University, Chand Bhag, Beacon House, Pakistan Cricket Board and most importantly Punjab Sports Board. We are small scale and there is immense competition in our industry. Lower price and high quality are the order winners and as far as price is concerned there is a huge upset that we and most probably all companies in the industry are facing.

Power blackout, meaning short or long shortage of electricity, is the biggest curse on every industry. Pakistan's drowning situation is the majorly due to power shortage. And we all know this problem will never go away. Our factory is in danger because of this problem, we already are a small business and when we are pushed with power shortage we go more deep down. When our customers give us order they do not care of the existence of power blackout and expect order to be completed on time, if not then they either cancel the order or take the finish goods and never return. And if we try to complete the orders on time using other power methods let's say generators then the cost of production increases, reduces our profits or giving us loss.

Since I started helping my father, I met some potential customers like UMT and UCP and they were quite impressed by our quality and related prices and wanted to give us order but because of power blackout we did not take risk and decided to work with the existing customers because it's even difficult to fulfil their order in the first place.

Generators lower profits because their cost is very high, first the buying cost and our machinery requires a heavy generator then its operating cost, then its service cost it is too much for us. We have a generator which operates on petrol as well as gas. We all are aware of petrol prices and yes we all are also aware of gas shortages and holidays. Moreover the area where our factory is located has no gas connection and so we use LPG cylinders which is very costly and we have to face its delivery charges as well. So in short running a manufacturing company with power blackout is like playing an already difficult game on hard mode.

Let's review the delay cycle, when we get order, we call the cloth manufacturer who provide us with raw materials, they face the same power problem and charge us high price with delay on supply, when we get the raw materials we give it to the dying unit which also do the same thing then the final material comes to us which is converted into finished goods and we sent to the respected customer after delay or by facing loss. Many of the businesses of the same industry shut their operations because they were going bankrupt or had no business at all because of power blackout.

Now here some of the large scale companies still benefit because they can use other methods of electricity and still make profit because they are large scale and use efficiency as their kicker. They manage to complete their orders on time and still make good profit. But some large scales which are working internationally face the same problem as we do because their competition is global and not every country is "blessed" with power blackout.

A RIGOROUS LITERATURE REVIEW:

Presently Pakistan has a very low share of the international textile market and due to the economic slowdown in US and Europe, Pakistan's textiles exports are also declining as they are mostly dependent on these two markets. China tops the US market with a share of 36% followed by Bangladesh 21%, India 18%, and Morocco 19% and Pakistan 13%. South Korea has lost 20% market share of the US market. In the European market, China tops again with a share of 29%, Vietnam 28%, India 19% and Pakistan only 1.5% while the Philippines had lost 11% of the market. According to APYMA, textile exports have declined by about 20% in 2008. The industry is bracing for more trouble ahead with continuing crises of electricity and gas, international market access, global economic slowdown, and adverse travel advisories. APTMA, Pakistan's spinning industry association established for the promotion and protection of the textile industry, says that the high cost of finance because of the nation's tight monetary policy has added to their continuing woes. [7] 

C:\Users\owais\Desktop\Untitled.png

As we can see here total exports of Pakistani textile has fallen from 61.1% to 53.8%. This could be the result of many factors that Pakistan is facing nowadays. Major factor behind such a loss is power blackout, power substitute increases the cost of production and makes Pakistani textile less competitive and hence we lose our share from the global market.

Another article named, "Inefficiency: Textile industry admits it has a productivity problem" Mohsin Aziz, the head of the All Pakistan Textile Mills Association (APTMA), the largest textile lobby in the country, said: "Based on the recent surveys of foreign consultants, we believe that the overall Pakistan's textile mills are quite efficient. The real problems of industry are power shortages and high interest rates in Pakistan that are hindering the growth of industries in the country."

This means that overall textile industry is efficient but the power blackouts and interest rates are downgrading the economy.

But while most textile executives acknowledged that the power crisis was a problem, they also say that it is not an insurmountable one. "It is true that Pakistan has been affected by the continued power shortages," Sohail Tabba, CEO of Gadoon Textile Mills and Fazal Textile Mills told The Express Tribune, "But unless we work on efficient power systems, we cannot control power shortages.

INSTALLED CAPACITY (in 000)

WORKING CAPACITY (in 000)

Period

Units

Spindles

Growth%

Rotors

Growth%

Looms

Growth%

Spindles

Growth%

Rotors

Growth%

Looms

Growth%

The idea here is to improve the level of efficiency which will in return improve the power shortage. The main concept they are trying to portray here is that the business model of textile industry is weak and this is because the government is feeding them with subsidies making them inefficient and unproductive.

2007-08

521

11834

13

188

25

8

0

9960

25

114

63

4

33

2008-09

521

11280

0.12

194

3

8

0

10241

1

114

-

4

-

2009-10

526

11392

0.99

195

1

7

-12.50

10631

4

140

23

5

25

2010-11

524

11762

3.25

196

1

7

0.00

10757

1

143

2

5

-

Moreover most textile companies in Pakistan are spinning and weaving and they buy cotton from other parties this makes them suffer the large variation in cotton prices and hence their final product comes out expensive. [8] 

Source: Growth of cotton textile industry in Pakistan, TCO

The table show the growth of cotton textile in Pakistan from 2007 to 2011 and it is very evident from the statistics that textile growth has fallen. Moreover there is a huge difference between the installed capacity and working capacity which means textile industry is no way near full capacity utilization. Reasons for this could be many;

For example, the industries are not using the resources given to them efficiently

Power and energy crisis is not making the industry work to its full potential

Competition is subsequently high and Pakistani textile industries are not getting enough orders.

Pakistani industries are not getting enough orders because they lack quality

Another article," Pakistan's Textile Industry Is Dangerously Fragile" Farhan sharif talks about the owner of Dilkhush Hosiery Mills, Chaudhary Maqsood Elahi who was a very successful exporter of knitted garments, tried to save his factory for two years, he sold his house, cut down on employees and switched to air shipment to meet the orders on time but failed and shut down his 15 year old factory, he said the reason was, "Power blackouts last as long as 20 hours at a stretch in Faisalabad, while shortages of natural gas, which powers the looms, can go on for six days at a time"

Farhan further said more than 200000 workers lost their jobs because of power crises and thousands of textile workers came out on the straight and protested against power shortage but to no avail.

Farhan further said, "The Pakistani textile industry has had a golden opportunity to capture markets lost by Chinese producers because of rising wage pressure in China and the appreciation of the yuan. But according to the Pakistan central bank's latest annual economic report, the local industry hasn't been able to seize the advantage. Instead, Bangladesh and Cambodia have increased sales of apparel as Pakistani manufacturers struggle with energy shortages" Now the question here is why Pakistani industries didn't take this advantage. This would have helped the economy boomed and flourish but nothing happened.

Our prime minister at that time Yousaf Raza Gilani promised to install new power plants in Faisalabad so that energy crises can be resolved, but since now nothing has been done about this and still many exporters are suffering loses like Mr. Elahi did. [9] 

Mirza Ikhtiar said, "Labour productivity is very low. Our regional competitors take 75 minutes to complete and produce one piece of cloth whereas we take 133 minutes for the same work. We also waste 30 percent in finishing and 12 percent in washing." (Mirza Ikhtiar Baig) [10] which obviously means that corruption is going on in using resources. Furthermore, we can conclude that our machinery is either ineffective or have gone obsolete due to inadequate timely investment and innovation. One of major reason might be the rising interest rate which has crippled the small investors and made them risk-averse. [11] So because of insufficient capital investment textile industry is unable to achieve its full efficiency. Mr. Mukhtar further said, "The lack of R&D in the cotton sector of Pakistan has resulted in low quality of cotton in comparison to rest of Asia. Because of the subsequent low profitability in cotton crops, farmers are shifting to other cash crops, such as sugar cane. In Punjab alone, the cotton area sown this season was less by 1.14 percent as compared to the last year. Textile owners argue that although the Cotton Vision 2015 targets 20 million bales till 2015, it is an ambitious target as in reality cotton production is decreasing each year. It is the need of proper R&D that has led to such a condition. They further lay blame on cartels, especially the pesticide sector, for hindering proper R&D. The pesticide sector stands to take advantage from stunting local R&D as higher yield cotton is more pesticide resistant.

Industrialists also argue that the non-guaranteed supply of power by WAPDA is another problem that negatively affects the textile industry. Although, some textile units have built their own energy generating plants to cut cost (these units run on gas), small units production depends entirely on the electricity supply of WAPDA. The textile industry suffered heavy financial losses in Dec, Jan and Feb quarter, because of the inconsistent electricity supplies. The lack of production subsequently resulted in the industry not meeting its target for the quarter, massive financial losses were borne by textile owners and sadly, it hit the most vulnerable: workers on daily wages. Their frustration was observed recently, when the WAPDA and MEPCO (Multan Electricity Power Company) offices in Multan, were torched by daily wage workers. Textile owners as well as workers passionately assert that the inconsistent supplies have and are destroying business across Pakistan. They also highlight that the high cost of the utilities has making Pakistani textile uneconomical in the international market.

Even foreign interest is showing that Pakistan need to improve its textile sector if they want to excel as a country. For the sustainability of Pakistan's economy, the hurdles faced by the textile industry must be removed with friendly policies as the industry is the single largest provider of employment, brings huge export orders and lends support to all those western businesses which are shifting focus to this region, says a foreign industry representative. [12] Denis Chiarello, area sales manager of Italian based company Tonello, who was in Lahore a couple of days ago for Garment machinery Exhibition further said Pakistan's power crisis and unfortunate law and order situation have damaged not only the local companies but also the foreign investors and companies.

Textile exports from Pakistan stood around $12 billion in 2011-12, but the industry supposes that it can easily strike the $20 billion mark if provided with continuous power supply. Which means Pakistan can gain its original position if and only if energy crisis supported Pakistan.

The Garment machinery Exhibition IGATEX Pakistan 2012 which took place in Lahore expo centre, opened many opportunities for large mills to upgrade their machinery since more than 500 companies came to Pakistan to sell their machinery. This helped the industries to buy the machinery right there and then and avoid the importing cost and duties. I myself visit the place and was impressed by the presentation they displayed and many machineries were sold on the very first day, by many large textile industries of Pakistan.

In another article Mr. Paras said, "Quality issues have been well known since then as poor quality seeds and low Bt toxin in these crops has been reported. Low toxin could mean that Cotton pests may develop resistance, sooner than anticipated and thus rendering Bt Cotton technology ineffective. This must be blamed on poor control by the Agricultural department and lack of quality control and parameters by the local seed companies." [13] And when there is no quality control the quality of cotton will obviously fall, this is the reason why China and India are taking our share of the market. At one point we don't have technology to produce advance seed and if we do have we don't know how to handle that technology and make faulty seeds that produces low quality cotton.

Cotton price plays a major role is establishing or destroying a textile industry, Pakistan's cotton prices are shooting high breaking records as pointed out in this article, "Cotton prices continued to climb Thursday in Pakistan breaking all previous records for better quality crop. On previous day spot rate, at the Karachi Cotton Association (KCA), increased by Rs 75 to Rs 4,700, breaking all previous records." [14] Our textile industry is already in danger and the raw material that is used is breaking records in high prices. There is no support from anywhere to improve the situation.

There was a very important Swot analysis I found in Mohammed Ather Akhlaq's report, the Swot is given in the diagram below;

STRENGHTS

Raw Material base

Labour

Rich heritage

Domestic market

WEAKNESSES

R&D

Poor Quality standards

Labour productivity

Unstable political situation

Poor infrastructure

SWOT

THREATS

Power blackout

New competitors

Phasing out of quota system

Fashion life style

OPPORTUNITIES

Pakistan textile city

Marketing

Collaboration with foreign companies

Production high value products

Image building of Pakistan to attract FDI

STRENGHTS

Pakistan is the fourth largest producer of cotton, which helped them make a very strong base for its raw materials; Pakistan is not depending on imports for raw materials.

Cheap labour has always helped Pakistan in developing its economy, ample supply of cheap labour strengths the textile and agricultural sector of Pakistan.

Pakistan enjoys diversified culture which helps in increasing the variety of designs. Increase in income levels and growth of urban life has increased the demand of textile products. [15] 

Textile industry of Pakistan is the largest foreign exchange earner

Availability of low-cost Land

Availability of low-cost machinery

Major parts of textile goods are from man-made fibre rather than synthetic one. [16] 

WEAKNESSES

In Pakistan, there is some research done on small scale by private companies to invent modified cotton fibres. Practically no efforts are being made by the APTMA in the R&D of the textile industry to improve the quality of its products, advance the technology used, and persuade effective methods of production in order to compete internationally.

The industry suffers lack of latest means of production and hence suffers falling cotton crop output every year. Due to low quality of cotton crop, profitability decreases and the farmer switch to the other crop such as sugar cane, maize and thus the cotton production decreases.

With the exception of big and leading units who comply with global quality standards in textiles, most of the medium and small sized units cannot ensure the reliable and consistent quality standards.

Some of these textile units import second hand machinery from China, India, Korea, and Taiwan with no checks and balances on the quality of the machinery parts and tools.

Preference is only given to the cheap and workable machinery with no concern of the quality of the machine, therefore, resulting in poor quality of the end product.

The industry can generate more profit by adding more value to the product, as value can be measured in terms of quality, increased per unit price, etc.

Pakistan's textile industry should focus on latest material handling techniques and should train workers.

The inability to timely modernize the equipment, machinery and labour has led to the decline of Pakistani textile competitiveness.

Political volatility, strikes and terrorism have critically affected the economy of Pakistan. Recurrent changing of the government has adversely harmed the policies of the textile sector. World trade review states that there are many deficiencies in Pakistan's textile industry.

OPPORTUNITIES

Pakistan Textile City in Port Qasim, Karachi with an area of 1250 acres, will be completed in 2011 as a private public sector joint venture. The main purpose of the textile city is to provide the textile industry with the world class infrastructure to meet the global competitiveness and challenges and as to provide value added textile industrial zone.

Targeting the uncharted export markets with the help of insistent sales and marketing will pave the way for the textile growth.

Partnering with foreign countries will help Pakistan learn a lot, they can share technology and ideas, which will return in reducing cost of capital and improve efficiency.

Pakistan should try to export value added goods globally rather than exporting raw materials. It will create more value and increase profit margins.

Pakistan needs to improve its image in order to attract foreign direct investment. They should provide them with security so that their confidence can be built-up.

THREATS

Power blackout is the biggest threat Pakistan is facing, major textile companies fear shut down and many have already witnessed it. Power blackout is creating unemployment, and many skilled labours are converting their skill into something else to avoid unemployment.

The substitute of power energy is very expensive and is not efficient enough for textile industry to compete globally.

Pakistan is facing new competitors in textile sector such as India, Bangladesh, Vietnam and Turkey and our strategies are not good enough to fight against them.

Now that the quota system is out of question Pakistan fear from China and India because they have low cost of production and efficient labour.

Fashion is changing and it is making difficult for Pakistani textile industry to cope with it. Buyers force for quick delivery because they fear that by the time the order will reach the fashion will go out. [17] 

COMPETITVE ANALYSIS

GUL AHMED and KOHINOOR MAPLE LEAF TEXTILE MILLS

GUL AHMED

The story of textiles in the subcontinent is the story of Gul Ahmed. The group began trading in textiles in the early 1900s. The group entered in the field of manufacturing with the establishment of today's iconic name of Gul Ahmed Textile Mills Ltd in the year 1953. Since its listing on the Karachi Stock Exchange in 1970, the company has been making rapid progress and enjoying a leading position in the world of textiles.

With an installed capacity of more than 130,000 spindles, 300 state-of-the-art weaving machines and most modern yarn dyeing, processing & stitching units, Gul Ahmed is a composite unit - making everything from cotton yarn to finished products. Gul Ahmed has its own captive power plant comprising of gas engines, gas & steam turbines, and backup diesel engines. Believing in playing its role in protecting the environment, Gul Ahmed has also set up a waste water treatment plant to treat 100% of its effluent, bringing it to NEQS levels.

Gul Ahmed is playing a vital role not only as a textile giant, but has its strong presence in the retail business as well. The opening of its flagship store - Ideas by Gul Ahmed- marked the group's entry into the retail business. Starting from Karachi, Gul Ahmed now has an extensive chain of more than 40 retail stores across the country, offering a diverse range of products from home accessories to fashion clothing.

More than 50 years since its inception, the name Gul Ahmed is still globally synonymous with quality, innovation & reliability.

Vision

Setting trends globally in the textile industry.

Responsibly delivering products and services to our partners.

Mission

To deliver value to our partners through innovative technology and teamwork.

Fulfilling our social and environmental responsibilities.

Values

Integrity

Passion

Creativity

Teamwork

Business Activities

Excellence in quality and service is the hallmark of all operations performed at Gul Ahmed. Firmly standing by its business values, Gul Ahmed is active in manufacture and sale of textile products.

The manufacturing wing is an essential component in Gul Ahmed's operations. The manufacturing cycle, which includes spinning, weaving, processing, designing and stitching, results in an end product that is tailored to the most stringent customer requirements.

On the retail front, Ideas by Gul Ahmed offers fabrics and made-ups, ranging from home accessories to clothing. It not only provides fashion at great value, but also caters to various customer needs by offering a diverse product mix. This leads to a complete and enjoyable retail experience. As a result of this, the chain has expanded to 40 stores across Pakistan since its inception in 2003. [18] 

KOHINOOR MAPLE LEAF GROUP

The Company commenced operation in 1953 as a private limited company and became a public limited company in 1968. The initial capacity of its Rawalpindi unit comprised 25,000 spindles and 600 looms. Later, fabric processing facilities were added and spinning capacity was augmented. Additional production facilities were acquired on the Raiwind-Manga Road near Lahore in District Kasur and on the Gulyana Road near Gujar Khan, by way of merger.

The Company's production facilities now comprise 151,902 ring spindles capable of spinning a wide range of counts using cotton and Man-made fibres. The weaving facilities at Raiwind comprise 204 looms capable of weaving wide range of greige fabrics. The processing facilities at the Rawalpindi unit are capable of dyeing and printing fabrics for the home textile market. The stitching facilities produce a diversified range of home textiles for the export market. Both the dyeing and stitching facilities are being augmented to take advantage of greater market access. Fully equipped laboratory facilities for quality control and process optimization have been up at all three sites.

The Company has been investing heavily in Information Technology, training of its human resources and preparing its management to meet the challenges of market integration.

Kohinoor Textile Mills Limited continues to ensure that its current competitive position is maintained as well as supporting the ongoing improvement process in our endeavour to maintain world best practice manufacturing.

Textiles

KTML was established in 1953 at Rawalpindi and is one of the oldest companies of Pakistan with over 50 years experience in textile manufacturing. It was initially set up as a spinning and weaving project with 25,000 spindles and 600 looms. However, after decades of aggressive expansion and modernization KTML has emerged into a fully vertically integrated home textiles company with state of the art capabilities for spinning, weaving, dyeing, printing and stitching. The company has a diverse customer base with sales in both the local and export markets. The main international markets include Asia, Europe, USA and Australia.

Our corporate mission:

Put the customer first always.

Be flexible to the customer's needs.

Adhere to the highest quality standards.

Think innovatively but make informed business decisions.

Deliver results.

Vision Statement

The Kohinoor Textile Mills Limited stated vision is to achieve and then remain as the most progressive and profitable Company in Pakistan in terms of industry standards and stakeholders interest.

Mission Statement

The Company shall achieve its mission through a continuous process of having sourced, developed, implemented and managed the best leading edge technology, industry best practice, human resource and innovative products and services and sold these to its customers, suppliers and stakeholders.

Principal Business Activities

Kohinoor Textile Mills Limited is a public limited Company incorporated in Pakistan under the Companies Act, 1913 (now Companies Ordinance, 1984) and listed on all Stock Exchanges in Pakistan. The registered office of the Company is situated at 42-Lawrence Road, Lahore. The principal activity of the Company is manufacturing of yarn and cloth, processing and stitching the cloth and trade of textile products. [19] 

FINANCIAL COMPARASION

RATIOS

gul.png

kohinoor.png

The ratio table of Gul Ahmed shows the Gross profit has increased from 16.12 to 18.19 which means they were able to make more sales than 2010 and they were able to manage their cost of goods sold efficiently compared to 2010, whereas Kohinoor's table shows their gross profit fell from 18.71 to 15.15 which identifies that even though their sales increased but their cost of goods went higher than 2010. Gul Ahmed's gross profit was less than Kohinoor in 2010 but in 2011 because the cost of Kohinoor increase their gross profit fell compared to Gul Ahmed.

Net profit to sales ratio for both industries went in the same flow both went from around 2% to 4%, but Gul Ahmed's increase was about 48% and Kohinoor's was 35.8% so Gul Ahmed's net profit went higher than Kohinoor's.

Return on Equity, a very important profitability ratio states how much of net income is returning to the total capital involved. Gul Ahmed's went from about 14% to 28% which means their ROE doubled in 2011. Whereas Kohinoor's ROE did not increase with the same ratio it only went from 8% to 11%.

Debt of equity ratio shows the balance of how much debt is there in reflect to how much equity employed. Gul Ahmed's debt to equity ratio was 0.62 in 2010 which is too much because it states that 62% is debt and only 38% is equity. This will scare shareholders away but Gul Ahmed improved their ratio to 0.47 which is comparatively better than 2010. Kohinoor however was effective with only 34% debt and 66% equity in 2010, but they improved their ratio even more to 24% and 76% respectively.

Current ratio states how much capital is available in order to pay off short term debts called current liabilities, it is a liquidity ratio and must be over 1.5 to be perfect and unfortunately both the industries are lacking behind. Gul Ahmed's ratio did increase from 0.97 to 1.03 which means now they have 1.03 current assets to pay off 1 liability, but Kohinoor is in trouble because their 2010 ratio was 0.80 and it went worse to 0.67 which is extremely risky because they only have 0.67 current assets to pay off 1 current liability, creditors will feel reluctant to lend money to Kohinoor.

Another liquidity ratio Acid-test ratio disregards stock and then sees how much of current assets are available for current liabilities. This ratio gives shocking results for Gul Ahmed their ratio for 2011 is only 0.19 even though its simple current ratio was 1.03 this means most of its current asset is stock. With this ratio Gul Ahmed won't be able to pay back its liabilities and may force to get bankrupt. Kohinoor on the other hand is better than Gul Ahmed though their ratio is not ideal either.

Earnings per share, is a very important ratio for the investors they view this ratio in order to invest in an organisation. It states how much an investor can earn by its shares. Gul Ahmed's earning per share is 18.85 was 7.52 in 2010 which means they have increased their earnings by 59% it is incredibly attractive for an investor. Kohinoor's earnings per share is 2.2 was 1.91 in 2010 which mean they have increased their earnings as well but not in the same flow.

Inventory turnover, shows how many times an organisations inventory is sold and replaced in a given time period. It is a turnover ratio and show efficiency of a company. The turnover for Gul Ahmed is only 0.37 and for Kohinoor its 5.04 which means Kohinoor is efficiently converting its inventory into sales.

RESEARCH OBJECTIVES

To find out the power blackout effect on textile industry?

To find out the growth of textile industry

To find out what steps government is taking to overcome this problem

To find out what is making Pakistani textile less competitive

To find possible solutions

RESEARCH QUESTION

"Is Textile Industry suffering because of Power Blackout or there is a hidden TRUTH?"

RESEARCH METHODS

Choosing the right research is very important and it holds the whole research together, one wrong decision and result in wrong conclusions or biasness. In my research most of the data will be based on Secondary research, by news articles, web articles and blogs and other related researches. For Primary data questionnaires, series of structured questions related to the research which brings out very important data, will be given to the people working or owning a textile company and possibly from government bodies and follow up questions will be asked from them which will be random.Same size will be 30 respondents so that more information can be gathered and there are no biases in the research paper.Interviews will be taken from the higher authority people so that their perception is visible and can be used in the research. [20] 

TIME FRAME

I have almost four months to complete my research and present it with confidence. Four month duration is good enough for thoro study and research.

RESOURCES

Web is the best resource I will be using since it's a general topic getting one single mentor in an organisation will not help. I will be taking help from various people working in different companies and government individuals.

RESEARCH HYPOTHESIS:

Is Power Blackout the main reason of textile industry suffering?

H0: Power Blackout is the main reason of textile industry suffering

H1: Power Blackout is not the main reason of textile industry suffering

Is Quality of Cotton the main reason of textile industry suffering?

H0: Quality of Cotton is the main reason of textile industry suffering

H2: Quality of Cotton is not the main reason of textile industry suffering

Is Unskilled Labour the main reason of textile industry suffering?

H0: Unskilled Labour is the main reason of textile industry suffering

H3: Unskilled labour is not the main reason of textile industry suffering

To justify the research hypothesis I used questionnaires and follow up interview questions and used 30 respondents to answer the questions so that there is no biasness in the research. All the respondents were qualified and were working in the field of textile as either the owner or senior employee.

The questionnaire analysis is given below;

1. Do you think Textile industry of Pakistan is suffering?

Yes

No

Now the data here shows that 97% respondents said there is a problem with our textile industry which means the industry should take initiatives to improve their situation. 97% means 29 out of 30 respondents are facing problem in their businesses.

2. Is your company a victim of power blackout?

Yes

No

Now this question was very important for the research since it brings out the prevailing problem. 100% respondents said their textile companies are a victim of power blackout, there was not even a single one who could say we have no problem with power blackout. But is power blackout the core problem of textile industry loss or there is some other factor, we will find out in coming questions.

3. Do you think power blackout affect textile industry?

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

The graph shows that out of 30 people 12 strongly agree that power crisis is affecting the textile industry and their organisation while 8 respondents disagree, which mean they have some kind of counter attack for power supply. But as a whole 22 responds are affected by the power shortage.

4. Are you using any substitute for power energy?

Yes

No

This graph brings out the fact that 83% respondents are using substitute for power energy in order to survive in the industry while the other 17% 5 respondents are not using any substitute and hence face so much problems. They further revealed that even though they use substitutes their cost of production gets very high and they lose their share in competition.

5. If yes then which substitute are you using?

Diesel Generators

Gas generators

Company owned power plant

Solar energy

Other…. Please specify……………………….

Now since 5 respondents said they only use the "sometimes provided" power energy the other 25 respondents showed this result when asked which substitute they are using. 10 respondents said they have their own power plants which obviously mean they do not depend on Wadpa. But they also added that because they use their own power plants their cost is very high and they are not competitive in the market but they are still doing business. The gas and diesel generator respondents are 12 in total and they said the maintenance cost is very high and is frequent. They said the generators are not reliable enough to bring productive output and so their prices are higher than in the market. Only 3 respondents are using solar energy, when asked why only 3 they said it's because the proper setup is not available is Pakistan and there are no authentic maintenance organisation is Pakistan so it becomes very risky to set up a solar plant. But they further said still it is cost effective and they fear its sustainability and continuity

6. Do you think using power substitutes increases the cost of production for textile industry?

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

Well all the 30 respondents said power substitutes increase the cost of production because they added to the production cost. Cost of maintenance and repair is huge in power substitutes and they cannot be ignored because it will in return end up stopping the whole production process. When production cost is increased the margins of textile companies are lowered or in some cases goes to losses. So companies are forced to raise their final prices in order to pay for their expenses and when they do that they become less competitive and importers buy from other countries. This is one of the reasons why China and India are taking more share of the market now.

7. What do you think is the basic problem textile industry facing?

Power crisis

Quality of cotton

Political pressure

Lack of R&D

Technology

Unskilled labour

Other …. Please specify……………………….

Now this graphs points out something very interesting. Out of 30 people 14 actually think the core problem of downfall of textile industry is low quality of Cotton which means 46.7% people think it's not power crisis that's making textile industry a nightmare. Only 8 respondents said power crisis is the main reason. 3 said political pressure and other 3 said lack of research and development and one said technology and the other one said unskilled labour.

Now all these factors are very important for the growth of textile and as we can see all the factors are not ideal for Pakistani textile. Quality of Cotton is a big issue, they said even if we don't have power shortage our final products are not as high of quality as of other exporters because our basic cotton is not of good quality. They said price do play a role in the success of textile industry and power crisis do affect on the price but overall price play a small role the main role is of the quality of the product. They added our products are bought by importers who add value and sell the final outcome in designer image and if our product is of low quality then our product is rejected because they want to protect their own image. They further said they have latest technology and their workers and quite efficient but what can they do if the quality of their raw material is not good enough.

8. Do you think our textile industry provides high quality products?

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

This is the only question with Zero Strongly agree respondents, 20 respondents said our product quality is not good and 5 respondents strongly Disagreed with the statement as well. This means the last question result is very important to this research it pointed out that our cotton quality is really bad which makes a bad final product. Only 3 respondents agreed to the statement and said there is nothing wrong with the quality of their product.

9. According to you if power crisis improved our industry will easily compete globally?

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

According to the answers if power crisis improved 10 plus 2 respondents are positive that their textile condition will improve. 10 said there will be no difference if power crisis improved they said yes the prices might go down but still the main affect will not improve. 7 disagreed and one strongly disagreed.

10. According to you if cotton quality improved our industry will easily compete globally?

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

This is turning out to be an interesting analysis, 16 respondents agreed that if quality of cotton improved the textile industry will be more competitive and 9 strongly agreed to this point, which means 25 out of 30 respondents want cotton quality to improve and according to them power crisis are not of that importance. Only 2 respondents disagreed to this point and 3 remained neutral. Apparently the main reason is turning out to be not power crisis but cotton quality.

11. According to you if political pressure reduced our industry will easily compete globally?

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

Well as the diagram represents political pressure is not the core problem in textile industry and their reduction will improve the textile but not that much. 56% respondents said it won't make any difference. Only 27% said it will.

12. According to you if R & D improved our industry will easily compete globally?

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

Research and development is very important for an industry, it makes the industry efficient and advance and help face competition, but Pakistani textile industry think it is not that important. Apparently only 27% agreed to the statement and over 46% people disagreed.

13. According to you if labour skills improved our industry will easily compete globally?

Strongly disagree

Disagree

Neutral

Agree

Strongly agree

If the labour is skilled it helps in reducing the cost of production and help in innovation as well. But when asked if they help in making textile industry competitive and answers were not that supportive 47% people said no it's not important while only 33% said it is.

FINDINGS

1. Is Power Blackout the main reason of textile industry suffering?

H0: Power Blackout is the main reason of textile industry suffering

H1: Power Blackout is not the main reason of textile industry suffering

According to the answers to the questionnaire and follow up questions we can analyse that textile industry is affected by power crisis and many companies have bared losses because of the very reason. We even found out that these companies are using power alternative and what are the alternatives available in Pakistan. But whether it's the main reason then the answer is No power blackout is not the main reason for deficiency of Pakistani textile. Because with the help of alternates they can counter attack this thread.

Hence WE FAIL TO ACCEPT H0 because power blackout is not the main reason of textile industry suffering.

2. Is Quality of Cotton the main reason of textile industry suffering?

H0: Quality of Cotton is the main reason of textile industry suffering

H2: Quality of Cotton is not the main reason of textile industry suffering

Quality is the most important factory in any industry if they want to be competitive and succeed. Quality makes or destroys a company, and according to the answers Pakistani textile stakeholders said bad cotton quality is the main reason for textile industry not being competitive anymore. They pointed out that price is important but not to that much extent as quality, many exports lost their share because of quality and not because of power shortage or high price or lack of R & D. They said they have their own power plants and power crisis least bother them.

Hence WE FAIL TO REJECT H0 and the statement Quality of Cotton is the main reason of textile industry suffering is justified.

3. Is Unskilled Labour the main reason of textile industry suffering?

H0: Unskilled Labour is the main reason of textile industry suffering

H3: Unskilled labour is not the main reason of textile industry suffering

Unskilled labour makes and industry makes an industry handicap and their chances of advancement seizes because it's very difficult for unskilled labour to adopt new technology. Textile industry is getting affected by unskilled labour but it's not the main reason.

Hence we fail to accept H0, and the statement is not justified.

From the findings and analysis it is evident that core problem of textile industry suffering is QUALITY of cotton and not power blackout.

CONCLUSION

We have studied and tested various hypotheses in order to make a stand on what actually is creating major problems for textile industry. We came up with very interesting reality and found out that the main issue wasn't the core issue at all.

We found the hidden truth behind the failure of textile industry and that truth is OUR COTTON IS OF POOR QUALITY, and it's not basically because of the power blackout or energy crisis it's because the raw material we are using is not of the international standards which is making us lose foreign market share.

Even in the Swot analysis given in literature review shows that Pakistan' s textile industry has no quality standards and so there are no quality checks for the raw materials. This is the major weakness which is affecting the textile industry.

It was also given in literature review that poor quality is a result of low toxin bt they said because of this the pest start resisting sooner than usual and destroy good crop.

It is like a cycle the textile industry is blaming bad quality cotton and cotton farmers are blaming agricultural industry for having poor pest control checks. It's very difficult to find out the real culprit.

Though rarely, but if good quality of cotton is generated it is sold in very high prices which makes it difficult for textile people to afford it and even if they do buy it they sell the final product in high prices as well in order to break even, or make profit.

Though we cannot ignore the fact that power blackout is affecting textile industry, it's making the industry expensive and less efficient, and many companies are forced to either shut down or find alternatives to power in order to survive. Making their own power plant is the only safe and effective way but not all companies can afford such an expenditure and so only big players of the market is benefiting from this idea. Both Gul Ahmed textiles and Kohinoor textiles are own owned power plant industries that is why they have no issue with Wapda generated Power.

We even found out that solar power is resourceful, is cheaper to set up and can replace the Wapda but it is still in process and has not been launched officially, Pakistan is still building Solar power plants and we all know, how much time it will take, since corruption is our country motto.

We also read that we have the technology to make good quality cotton seed so it's all a lie that we are outdated. We have everything it takes to compete globally and locally but the problem is we don't know how to use the technology and the wrong use is making our cotton of bad quality.

What basically the issue is that before there is just China as our competitor as even if we perform bad it was a 50 to 50 or 60 to 40 share of the market, but now we have India, Bangladesh, Vietnam, Philippines and many other countries holding each others from the neck in order to get shares. Now quality, price, efficiency consistency is all equally important, and since we are amongst the cheapest labour force we do have an edge against some countries in charging comparatively low prices now only quality is the issue and we are not taking care of.

Yes it is true that for small textile company owners, like my father, it's very difficult to deal with power blackout, they obviously cannot afford power plants nor can they afford big size generators, it is strange battle for them, battle for survival. My dad because of power shortage lost a very big order of delivering 25000 tracksuits to Punjab Youth Festival, he knew it would be impossible to complete on time considering the power shortage so he only took 7000 tracksuits and the rest went to some other big company in Sialkot.

RECOMMENDATION

Pakistani cotton industry should follow the national standards so can be easily compared globally.

Measures must be taken to make sure that the quality standardization is being followed.

Textile ministry should arrange conferences to provide value added information to the players of textile, in those conference they can educate different fields of textile where quality can be improved, teach the farmers how to harvest better quality cotton.

The ministry of textile should with full commitment cooperate with the textile industry and work for their benefit, because textile industry alone is the only industry that is the profitable spine of Pakistan.

Pakistan Cotton Standard Institute, PCSI, should develop quality control measures and be very strict and fine companies that are not following the standard. [21] 

PCSI should offer training and development seminars and lectures for upcoming technology and up gradation

I have analysed that even if the government bodies are doing their part the local buyers still in order to buy cheaper raw material ignore the standards and buy from poor cotton producers, the buyers should ask for good quality, for a cotton of good weight, so that producers are forced to produce good quality.

Government bodies should form a private department for inspection of quality, and give them authority to cancel the licence of producers of low quality cotton.

The government should lower the prices or give incentives to producers for pest control medication.

Government should come forward to provide incentives to small textile companies by improving energy crisis problems or by reducing generator prices

Government should also take action to put a price ceiling for gas and petrol prices so that small companies can afford maintaining generators.

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