Business

Textile manufacturing plants to be constructed in Eravur 

By Zahida Rizvi 

 

The Government has given the green light to commence the construction of textile manufacturing plants in 2021 with a view to cut down the expenditure on apparel raw material imports, The Morning Business learns.

“Discussions are underway with the Government to construct 10 to 12 textile manufacturing plants in Eravur, with an investment from the private sector. It would entail infrastructure cost of around Rs. 5 billion. We can project an increase in procurement from Sri Lanka to approximately $ 1 billion,” Joint Apparel Association Forum (JAAF) Secretary General Tuli Cooray told us.

“Fabric worth approximately $ 2 million is being imported from various sources including China, Korea, Indonesia, Taiwan, and Hong Kong since cotton and synthetic fibre are mainly import dependent,” he added. 

The JAAF Secretary General pointed out that due to the Covid-19 pandemic, the industry encountered problems and the supply chain got disrupted.

In the 2021 Budget, under “Strategic Development”, the Government announced tax concessions up to a maximum of 10 years for over $ 10 million investments for setting up fabric plants.

Sri Lanka last year earned $ 5.3 billion from apparel exports. Prior to the Covid-19 pandemic, the industry originally expected a 6% increase in exports for 2020.

The JAAF anticipates the construction of the textile manufacturing plants in Eravur would lead to the reduction in imports of fabric, as apparel manufacturers would be able to replace part of their imported fabrics with fabric sourced locally.

By the end of 2020, Sri Lanka imported fabric to the tune of Rs. 40,029.368 million for export-oriented apparel manufacturers. The import bill for fabric to be used for consumption in the local market came to $ 2.2 billion.

Export earnings from apparel and textiles in October declined by 18.93 % to $ 356.52 million and by 21% to $ 3.6 billion, respectively, in the first 10 months of 2020 from a year earlier. Despite the decline in the sector, earnings from exports of other textiles increased by 43.92% in October 2020 in comparison to October 2019.

In an attempt to promote the domestic textile industry, Sri Lanka is going to limit imports of textiles and readymade garments and increase garment import taxes. Sales from these seven fabric mills to BOI (Board of Investment)-registered apparel exporting companies amounted $ 499 million last year.  

Additionally, the Ministry of Batik, Handloom, and Local Apparel is targeting value addition of $ 54 million per annum to the current $ 5.9 billion in apparel exports in 2021 and also the creation of a “National Fabric Fund” by increasing the fabric import Cess by $ 1, and is set to establish nine fabric parks which can facilitate the necessary requirements.

Raw materials worth $ 2.8 billion and finished goods worth $ 276 million are imported to Sri Lanka annually. By investing in the local market, the Ministry anticipates to reduce net imports by $ 38 million through the production of raw materials.