Oman has neither cotton nor readily available market for cotton yarns, so what prompted you to set up this project in Oman, ignoring its much wealthier and larger neighbours?
For setting up our first manufacturing outside India, we were looking at all the GCC countries where there is availability of cheaper power, sound infrastructure and close proximity to a port. While scouting for the location, we came in contact with Sohar Port and Freezone authorities, and other key officials in Oman, and I was very impressed by their humane and kind nature. They (authorities) visited our plant in India, and saw various facilities inside our plant, which they liked. And they told us they were ready to support the project. Oman has everything that we were looking including, low power cost, excellent physical infrastructure and close proximity to the port.
However, the most important factor, which forced us to come to Oman, compared to other GCC countries, was humanity of Omani people. We were very impressed by humble, soft and caring nature of Omani people when we met them. While visiting Oman, I never felt alienated; I felt the comfort of my home in Oman. I am getting same support, hospitality, and comfort that I get in India.
What are the key benefits that Oman’s economy will get through a project like this in future?
The total investments in the project would be around US$300mn, and probably it will be the first yarn making project in the world that would come up in a location, where there is no natural supply of cotton.
Besides this, the project is being set up where there are no textile making units, which consume yarns. Despite all these hurdles, such a big project is being set up in Oman and it shows the competitive advantages Sohar Port and Oman are offering to entrepreneurs. Another unique thing about this project is that it would generate around US$300mn revenues every year (in yarn manufacturing, revenue and investments are proportional to each other). It is an export oriented project, which effectively means that it would be a net addition to the country’s foreign exchange and economy. This project would have the potential to generate over 2,000 direct employees. The nature of textile industry is such that it always creates a large number of jobs. And if you look at history of industrial development of any country in the world, it began with the setting up of textile industry only. Any major industrial city in the world, be it London, Manchester, Mumbai, Shanghai or Tokyo, the process of industrialisation and urbanisation started with the setting up of textile industry there.
So with the setting up of a yarn manufacturing facility, lots of ancillary units are likely to come up here. Once ancillary units have started coming up, the second phase of the textile industry would start. But these things (the process related to second phase) are at a very preliminary stage. So now, our entire focus is on completing the first phase only.
You are also setting up a training centre, what is the idea behind setting up a training centre where there is no textile industry now?
The main idea behind setting up a training centre is to impart skills to local Omani youth. As without having proper skills, it would be very difficult for us to recruit them for the project. Imparting of skill will increase employability of Omani youths. And once yarn manufacturing starts, we will need skilled manpower to work there, and currently there is no availability of skilled manpower for textile sector in the country. Moreover providing training is very important for the success of this project as it will have the latest state-of-the-art machinery that requires skilled hands to operate. So, our idea is that before the unit comes up, availability of skill set should be ensured first. Another unique advantage associated with the textile industry is that it employees more women compared to men. Even in India, more than half of our workforce is women. This project could also provide employment to a large number of women in the region.
But how you will ensure raw material supply, as there is no cotton production in the GCC region?
We will be importing cotton from Australia and the United States of America. That is why we were looking at locations that are close to a port as this will help in keeping logistics cost low.
The project will manufacture high quality yarn, so we need quality fibre having higher counts for the project. Warehouses in the US and Australia bundles same strength cotton together, and that is very important for us as doing segregation inside our plant warehouse would be very difficult and costly for us. But if you are already importing segregated cotton, having same staple length, same specifications and same strengths, then it is very economical for us. Cotton being an agricultural commodity is prone to disruption in supplies. But as it is also among the largest traded agricultural commodities in the world and there are many multinationals across the world, who are trading in cotton, supply would not be a problem. Even in India, which has a large area under cotton planting, we are importing a significant amount of cotton from the United States and Australia for yarn making.
Cotton being an agricultural commodity is also prone to volatility in its prices, and an import dependent plant like this might face problem in maintaining profitability, what are you views about this?
We are not much worried about the volatility in cotton prices as the prices of yarn and the natural fibre goes in hand to hand. The moment cotton prices go up, yarn prices follow them. We maintain very strict financial discipline in the plant, and will be doing same here also.
So, if I have 500 tons of cotton in my warehouse, I will also have 500 tons of yarn to ensure total parity in profitability, and the other important thing is that many yarn makers also indulge in commodity speculation, but we have never done that.
But why did you choose to set up a cotton-based yarn making facility; wouldn’t blended facility or polyester yarn have been a more rational choice due to the abundance of petroleum products here?
In polyester yarn segment, China has a huge advantage over others. Their higher economy of scale means they can be very competitive in pricing. So, competing with China in the international market in polyester production would be very difficult for us. Besides this, in Oman there is no production of synthetic raw material or ethylene, which is a basic raw material for making polyester yarn. In India, we have a polyester yarn making facility too, as there is an availability of raw material. Reliance and Indo Rama are producing raw material there in significant quantity. However, in future if someone starts producing synthetic fibre in Oman, then it will make sense to install a polyester facility in the country.