In an exclusive interview with Muscat Daily, Chirag Pittie, managing director of ShriVallabh Pittie Group, talked about how their yarn manufacturing facility in Sohar could pave the way for setting up a textile cluster in the region. He said the availability of yarn could make it feasible for setting up fabric units in Oman and thus gradually may lead to setting up of a textile cluster.
You advanced the commencement of production by several months, what are the key factors that helped you progress so well in the project?
The rapid progress of the project was possible due to the support we received from Oman’s government. We are happy to be here as the support provided by the government and the cooperation received from other departments helped us to start the production one-year ahead of the schedule. We got very encouraging help from various stakeholders in terms of logistic facilities, planning and execution support that enabled us to receive the different kinds of approvals needed to start the production early.
This support was vital in ensuring that there are no delays in getting all necessary connections whether it is electricity, water or roads. I would particularly mention here the logistic support, as you know all these machines were imported from different countries across the world. So, getting required custom clearance was a big support to us.
Another advantage is that we are located near to the port, so machines and equipment can easily be moved from the port to the facility. All these factors helped us to complete the civil work much ahead of the schedule, and enabled us to start the production.
Looking at the pace at which the project is being executed, what are your plans for the next phase or what would be your next milestone?
Now we are commencing the production of the first unit of the first phase, and we are planning to start the operation of second unit in early 2019, may be in second week of January or latest by mid-February. So, the target is to start operating at full capacity by the end of March 2019. By that time, two units will be at production stage and the work on other two units will also be going on. As soon as the production from the second unit starts, we will begin construction of the second phase, which also will have two units.
Our target is to complete the second phase by the end of 2019. December 2019 is the date by which the entire project worth entitling investments of around US$300mn should be completed.
How sourcing of the raw materials and supplying of the finished product will be taken care as the unit is located in a place where neither input materials are available nor there are any demand for the finished products?
For sourcing, we are looking at multiple countries such as the United States, Eastern African countries or Australia. For selling finished products, we will be looking at markets such as Pakistan, Bangladesh, European countries and India or China. The demand for yarn is very much there in almost every geography. The key thing here is that, we are located very close to the port and that makes it very easy for us to import raw materials and export finished products without worrying much about freight costs.
How are you going to compete with other yarn makers, particularly Indian yarn makers who have access to raw materials, economies of scale and close proximity to end-users?
We have manufacturing units in India also and have a very good understanding of this business. Logistic costs end up playing a very significant role in terms of calculating Ebitda margins in our business. One clear advantage here is the lower energy cost as compared to locations such as India or Bangladesh. Other big advantage is the close proximity to the port, which means we will not have any road-logistic costs and that is very expensive in India. All these factors make us confident about improving and maintaining our margins in Oman.
Many people are predicting that the setting up of a large yarn manufacturing facility could be the first brick in developing a big textile cluster attracting billions of dollars in investments. Could you please elaborate on this?
There are talks about building a textile cluster in Oman as the GCC countries import a significant amount of textile products. Manufacturing base here is very small compared to the demand for these products. Now, the idea behind this is that the presence of yarn - the basic ingredient required for making cloths or fabric - could make it feasible for setting up fabric making units, as a part of forward integration process.
So, once the yarn production facility is in place, which is a very capital intensive industry, one can see significantly smaller investments enabling the fabric production units. It make sense also as everyone knew that the demand for textile products in the GCC region is increasing. I believe step-by-step, it could lead toward a textile cluster being set up here.
The presence of a big oil refinery in Sohar makes a perfect case for setting up a synthetic yarn facility but still you opted for a cotton-yarn facility, which is prone to supply disruptions also. What do you say on this?
In present times, the demand for cotton-yarn is significantly higher than synthetic one. The entire global synthetic-yarn probably would account for around 15-20 per cent of the overall yarn-making industry. So the whole yarn-making industry is dominated by cotton yarn. Besides this, we specialise in cotton-yarn only, but we do have synthetic-yarn production facility in India. The facility, which is being set up here is a compatible one, which means same facility can be used for producing synthetic yarn also. So far when Oman is considered, the principal raw material (plastic or nylon) is available here, but there are few processes, which need to be done before using that material in the textile industry. We have started with cotton-yarn but as we move towards setting up textile industry in future, we may also look at setting up synthetic-yarn making facility in future.
Did anyone from your organisation held any discussion with the government officials about the possibility of growing cotton in Oman?
From what we understood, farmers used to grow cotton in Oman but it was stopped as there was no significant demand for the natural fibre. We have a team in India that specialises in cotton cultivation and this team has visited Oman. And the team has carried out initial tests, which showed that it is feasible to cultivate cotton in Oman. We are looking to put some kind of arrangement by which cotton-cultivation can be promoted in Oman. In that arrangement, we would give assurance of the complete buyout of the harvest. So, we are trying but things are at very initial stage at present.