Page| 1

--Chapter I--

--Introduction--

Page| 2

Introduction

The textile industry has a glorious history in India. It reached its peak of

excellence in the period between tenth and seventeenth centuries. The Indian textiles

industry is a diverse, large, colorful, yet full of complexity like the country itself. India

is among world’s top producers of yarns and fabrics, and the export quality of its

products is ever increasing. Textile industry is one of the largest and oldest industries in

India. Textile industry in India is a self reliant and independent industry and has great

diversification and versatility. The Indian textile industry has greatest presence in the

economic life of the country. It is the second largest textile industry in the world after

China. The textile industry contributes about 14% to the country’s industrial output and

about 17% to export earnings. From the point of view of production, employment

export and consumption of cotton textile industry is very important.

Textiles occupy an important place in Indian economy. The industry employs

about 35 million people and contributes approximately 4% of the GDP of India and

17%of the country’s export earnings. The industry contributes around 25% share in the

world trade of cotton yarn. India is the largest exporter of yarn in the international

market and has a share of 25% in world cotton yarn have export market.

The major steps in the manufacture of textile clothes are:

To harvest and clean the fiber or wool.

To card it and spin it into threads.

To weave the threads into cloth and,

To fashion and sew the cloth into clothes.

The cotton textile industry has three main divisions. They are:

1. The mill industry producing yarn and clothes.

2. The power loom factories producing clothes from mill made yarn.

3. Widely dispersed handloom units producing cloth both from mill made and hand

spun yarn.

Thus, an industry has an important role to play both in economic prosperity of the

country and in the supply of an essential commodity for the entire population. The GTN

group traces its origin to yarns. Textiles and cotton trading for more than 5 decade.

Page| 3

The group has acquired in depth knowledge of various cotton growing areas in

the country and overseas and developed close touch with cotton yarn market quality

control is thus ensure from the raw materials to procurement stage.

The group entered into manufacture of cotton yarn in 1996 and has subsequently

shifted its emphasis to manufacture high quality yarns for sophisticated international

markets. Today GTN group has emerged as the largest exporter of cotton yarn in the

mill sector in the country.

The present study of an organization like GTN Textiles, one of the leading textile

Corporation units in Kerala, helps to study the organizational setup as a whole, i.e., how

they adapt the strategies and structures that guide them. Organization study gives the

opportunity to the students to understand the basic managerial skills and corporate

culture. It enables the students to understand their skills and interest which helps in

shaping the career. In addition to it, students come to know the history of the

organization, its milestones, vision, mission, plans, and expectations of the organization

regarding the qualities and skills of its employees.

1.2 Objectives of the Study

To study the overall functions of organization and gain practical experience.

To study about the structure of the organization

To make an analysis of the organization’s performance.

To understand the history, growth profile, structure, & future plans of the

organization.

To study the quality maintenance procedures and techniques adopted for keeping

the international standards

To understand the duties and responsibilities performed by employee at different

levels in the organization.

To conduct a SWOT analysis.

1.3 Scope of the Study

GTN Textiles Ltd, a well-reputed and experienced company in Kerala, who

enjoyed a monopoly for several years in the field of manufacturing of cotton yarns and

was found to be a good source for me as an MBA student. The company was running

Page| 4

under various departments and had vast hierarchies of administration, which could be

carefully studied for the well understanding of how a management works practically. In

addition to that, direct communication with the workers was also possible in the

company. So, it was found to be beneficial in doing a project work on the organizational

study in GTN Textiles Ltd.

1.4 Chapterisation

The whole study contains four chapters:

First Chapter is the introductory chapter. It contains the following:

Introduction

Objectives of the Organization study

Scope of the Organization study

Second Chapter depicts the Concepts of Organizing, Organization-its Process

and Structure, Departmentation and its Types, Types of Organization, and

Delegation of authority, Decentralization and Centralization.

Third Chapter describes the Industry Profile i.e. World Scenario, Indian

Scenario and State Scenario of textile Industry and other details.

Fourth Chapter deals with Company Profile that is about the detailed study of

History of the Company, Products, and each Department in GTN Textiles Ltd.,

the SWOT analysis, plans, Findings, Conclusion of this study and Bibliography.

Page| 5

--Chapter II--

--Theoretical--

--Background--

Page| 6

2.1 Concept of Organizing

Organization is the process of-:

1. Identifying and grouping the work to be performed.

2. Defining and delegating responsibility and authority.

3. Establishing the relationship for enabling people to work efficiency

together in accomplishing objectives.

The working relationships- vertical and horizontal associations between

individuals and groups- that exist within an organization affect how its activities are to

be accomplishing and coordinated. Effective organizing depends on the mastery of

several important concepts: work specialization, chain of command, authority,

delegation, span of control, and centralization versus decentralization. Many of these

concepts are based on the principles developed by Henri Fayol.

2.1.2 Organizing

Organizing is the act of rearranging elements following one or more rules.

Organizing plays a central role in the management process. Once plans are created, the

manager's task is to see that they are carried out. Given a clear mission, core values,

objectives, and strategy, the role of organizing is to begin the process of implementation

by clarifying jobs and working relationships. It identifies who is to do what, who is in

charge of whom, and how different people and parts of the organization relate to and

work with one another. All of this, of course, can be done in different ways. The

strategic leadership challenge is to choose the best organizational form to fit the strategy

and other situational demands.

“Organizing is the managerial function of arranging people and resources to work

toward a goal.” The purposes of organizing include but are not limited to determining

the tasks be performed in order to achieve objectives, dividing tasks into specific jobs,

grouping jobs into departments, specifying reporting and authority relationships,

delegating the authority necessary for task accomplishment, and allocating and

deploying resources in a coordinated fashion.

2.1.3 Organization

“Organization is the process of identifying and grouping work to be performed,

defining and delegating responsibility, and authority and establishing relationship for

the purpose of enabling people to work most effectively together in accomplishing

Page| 7

objective”. Organizations are groups of people organized for some purpose, such as

business or political activities.

2.1.3.1 Importance of an Organization

Significance of the organization in any institution is explained as below:

(a) It ensures optimum use of human resources: It establishes persons with different

Interest’s skills, knowledge, and viewpoints.

(b) It stimulates creativity: A sound and well-conceived organization structure is the

source of creative thinking and initiation of new ideas.

(c) Use of improved technology: A good organization provides for optimum use of

technological improvements.

(d) Co-ordination in the enterprise: In a good organization, the different departments

perform their functions in a closely related manner.

(e) Executive development: The pattern of an organization structure has strong

influence on the development of executives.

(f) It ensures cooperation among workers: A good organization promotes mutual

Goodwill and co-operation among workers also.

2.1.3.2 Principles of Organization

Principle means the theoretical basis on which something is build up. The

theoretical basis is formulated from fundamental truth. Some of the important principles

to be followed for developing round and efficient organizations are:

Principle of unity of objective

Principle of specification

Principle of co-ordination

Principle of unity of command

Principle of span of control

Principle of exception

Principle of flexibility

Principle of simplicity

Principle of communication

Principle of efficiency

Page| 8

2.2 Process and Structure of Organization

Organizing, like planning, must be a carefully worked out and applied process.

This process involves determining what work is needed to accomplish the goal,

assigning those tasks to individuals, and arranging those individuals in a decision-

making framework (organizational structure). The result of the organizing process is an

organization — a whole consisting of unified parts acting in harmony to execute tasks

to achieve goals, both effectively and efficiently.

A properly implemented organizing process should result in a work environment where

all team members are aware of their responsibilities. If the organizing process was not

done well, the results may yield confusion, frustration, loss of efficiency, and limited

effectiveness.

2.3 Types of Organization

Although there are a number of variations of organizational structure, we shall discuss

line and staff organizations and committee organization here.

2.3.1 Line Organization

The line organization is the simplest organizational structure. It is the “doing"

organization, in that the work of all organizational units is directly involved in

producing and marketing the organization's goods and services. There are direct

vertical links between the different levels of the scalar chain. Since there is a clear

authority structure, this form of organization promotes greater decision-making and is

simple in form to understand.

On the other hand, managers may be overburdened when they have too many

duties. The following figure illustrates a simple line organization:

(Figure 2.1)

President

Vice President

Operations

Vice President

Marketing

Purchasing Assembly Quality

Control

Promotion Sales Market

Research

Page| 9

2.3.2 Line and Staff Organization

When staff specialists are added to a line organization to "advise, "serve” or

“support" the line in some manner, we have a line and staff organization. These

specialists contribute to the effectiveness and efficiency of the organization. Their

authority is generally limited to making recommendation to the line organization.

Sometimes this creates conflict. However, such conflict can be reduced by having staff

specialists obtain some line experience, which will tend to make them better understand

the problems facing the line manager they support. Such functions as human resources

management and research and development are typical staff functions. The following

figure provides an example of such a structure.

(Figure 2.2)

2.3.3 Functional Organisation

In this type of organization, the personnel and their work are organized based on

the same type of work of activities. All works of the same type are grouped together and

brought under one department managed by an executive who is an expert. Thus, there

are separate functional departments, for the major functions of the business viz.,

engineering or production, purchase, sales, finance personnel etc. Each department

performs its specialized function for the entire organization. For example, the purchase

department deals with purchases on behalf of the entire organization, and so on. Now a

day, is almost all business concerns usually follow some sort of functional plan to carry

out the primary functions of business. However, it is the rare to find a pure functional

organization and there is always an element of line organization mixed with it.

President

Director

Personnel

Director Research

and Development

Vice President

Operations

Vice President

Marketing

Page| 10

(Figure 2.3)

2.4 Departmentation

The process of classifying an organization because of departments or similar

activities, to facilitate planning and control

2.4.1 Types of Departmentation

a) Functional Departmentation: - This is the simplest form of Departmentation when

grouping of departments is done because of functions such as production finance

marketing sales purchase etc., it is known as functional Departmentation. Further

sub divisions of the functions may be formed as marketing can be divided in to

advertisement sales and after sales service. Therefore, we can classify functions into

two parts.

Basic functions i.e. Production Marketing Finance and Personnel

Secondary Functions: - These are further parts of basic functions

according to the organizational needs or operations like Production: -

Product planning, R&D, Quality control, and material handling.

Functional Departmentation is useful where there is production of single

product or similar kind of product, for example TV Computer monitor or

TFT.

(Figure 2.4)

CEO

Production Finance Marketing Personnel

Advertisement Sales Market

Research

President

Creative Sales &

Marketing

Accounts Human

Resource

Manager Manager Manager Manager

Page| 11

b) Product Departmentation: - When grouping of activities and departments formed are

given name because of products manufactured in an organization, it is called

Products Departmentation. It is applied where there is large ranges of products are

manufactured. When there are several product lines and each product line consists

of a variety of items, functional classification fails to give balanced emphasis on

each product. Apart from this use, product or services may be made the basis of

major divisions by a departmental store, a banking concern, and an insurance

company. Again, manufacturing and marketing departments may subdivide their

activities because of products.

(Figure 2.5)

c) Territorial Departmentation (Geographical Departmentation): - Like the products

basis, geographical regions are adopted for main division as well as for subdivision

purposes. When activities of an organization are physically dispersed in different

locations territorial departmentation is adopted. Units that are located at different

areas are made so many self-contained divisions of the organization. Marketing

activities are very often subdivided because of geographical areas. This form of

departmentation can be useful where business is on national or international level.

For e.g. Indian railways, insurance company use territorial departmentation.

(Figure 2.6)

d) Customer Departmentation: - When departments are formed to cater different kind

of customers it is known as customer departmentation this basis of classification is

widely followed in sub-dividing activities of the marketing department. When the

products are offered to market through various channels and outlets, it has the

special merit of supplying goods in accordance with the peculiar needs of

CEO

Head TV

Division

Head AC and

Refrigeration

Head

Computer

CEO

Head North

Zone

Head East

Zone

Head West

Zone

Head South

Zone

Page| 12

customers. Customers may be classified according to buying capacity or nature like

wholesale, retail and export or government or public. Most departmental stores may

attempt t reach customers preferring low price or higher price.

( Figure 2.7)

2.5 Authority and Delegation of Authority

2.5.1 Authority

Authority is the formal and legitimate right of a manager to make decisions, issue

orders, and allocate resources to achieve organizationally desired outcomes. A

manager's authority is defined in his or her job description.

Organizational authority has three important underlying principles:

Authority is based on the organizational position, and anyone in the same

position has the same authority.

Subordinates accept authority. Subordinates comply because they believe that

managers have a legitimate right to issue orders.

Authority flows down the vertical hierarchy. Positions at the top of the hierarchy

are vested with more formal authority than are positions at the bottom.

In addition, authority comes in three types:

Line Authority gives a manager the right to direct the work of his or her

employees and make many decisions without consulting others. Line managers

are always in charge of essential activities such as sales, and they are authorized

to issue orders to subordinates down the chain of command.

Staff Authority supports line authority by advising, servicing, and assisting, but

this type of authority is typically limited. For example, the assistant to the

department head has staff authority because he or she acts as an extension of that

authority. These assistants can give advice and suggestions, but they do not have

to be obeyed. The department head may also give the assistant the authority to

Head

Marketing

Head Whole

Sale

Head

Retail

Head

Export

Page| 13

act, such as the right to sign off on expense reports or memos. In such cases, the

directives are given under the line authority of the boss.

Functional Authority is authority delegated to an individual or department over

specific activities undertaken by personnel in other departments. Staff managers

may have functional authority, meaning that they can issue orders down the chain

of command within the very narrow limits of their authority. For example,

supervisors in a manufacturing plant may find that their immediate bosses have

line authority over them, but that someone in corporate headquarters may also

have line authority over some of their activities or decisions.

The functional authority allows specialization of skills and improved

coordination. Frederick Taylor originally suggested this concept. He separated

“planning” from “doing” by establishing a special department to relieve the laborer and

the supervisor from the work of planning. The role of the supervisor became one of

making sure that planned operations were carried out. The major problem of functional

authority is overlapping relationships, which can be resolved by clearly designating to

individuals that activities their immediate bosses have authority over and which

activities are under the direction of someone else.

2.5.2 Delegation

A concept related to authority is delegation. Delegation is the downward transfer

of authority from a manager to a subordinate. Most organizations today encourage

managers to delegate authority in order to provide maximum flexibility in meeting

customer needs. In addition, delegation leads to empowerment, in that people have the

freedom to contribute ideas and do their jobs in the best possible ways. This

involvement can increase job satisfaction for the individual and frequently results in

better job performance. Without delegation, managers do all the work themselves and

underutilize their workers. The ability to delegate is crucial to managerial success.

Managers need to take four steps if they want to successfully delegate responsibilities to

their teams:

1. Specifically assign tasks to individual team members.

The manager needs to make sure that employees know that they are ultimately

responsible for carrying out specific assignments.

Page| 14

2. Give team members the correct amount of authority to accomplish

assignments.

Typically, an employee is assigned authority commensurate with the task. A

classical principle of organization warns managers not to delegate without giving the

subordinate the authority to perform to delegated task. When an employee has

responsibility for the task outcome but little authority, accomplishing the job is possible

but difficult. The subordinate without authority must rely on persuasion and luck to

meet performance expectations. When an employee has authority exceeding

responsibility, he or she may become a tyrant, using authority toward frivolous

outcomes.

3. Make sure that team members accept responsibility.

Responsibility is the other side of the authority coin. Responsibility is the duty to

perform the task or activity an employee has been assigned. An important distinction

between authority and responsibility is that the supervisor delegates’ authority, but the

responsibility is shared. Delegation of authority gives a subordinate the right to make

commitments, use resources, and take actions in relation to duties assigned. However, in

making this delegation, the obligation created is not shifted from the supervisor to the

subordinate - it is shared. A supervisor always retains some responsibility for work

performed by lower-level units or individuals.

4. Create accountability.

Team members need to know that they are accountable for their projects.

Accountability means answering for one's actions and accepting the consequences.

Team members may need to report and justify task outcomes to their superiors.

Managers can build accountability into their organizational structures by monitoring

performances and rewarding successful outcomes. Although managers are encouraged

to delegate authority, they often find accomplishing this step difficult for the following

reasons:

Delegation requires planning, and planning takes time. A manager may say, “By

the time I explain this task to someone, I could do it myself.” This manager is

overlooking the fact that the initial time spent up front training someone to do a

task may save much more time in the long duration. Once an employee has

learned how to do a task, the manager will not have to take the time to show that

Page| 15

employee how to do it again. This improves the flow of the process from that

point forward.

Managers may simply lack confidence in the abilities of their subordinates. Such

a situation fosters the attitude, “If you want it done well, do it yourself.” If

managers feel that their subordinates lack abilities, they need to provide

appropriate training so that all are comfortable performing their duties.

Managers experience dual accountability. Managers are accountable for their

own actions and the actions of their subordinates. If a subordinate fails to perform

a certain task or does so poorly, the manager is ultimately responsible for the

subordinate's failure. By the same token, if a subordinate succeeds, the manager

shares in that success as well, and the department can be even more productive.

Finally, managers may refrain from delegating because they are insecure about

their value to the organization. However, managers need to realize that they

become more valuable as their teams become more productive and talented.

Despite the perceived disadvantages of delegation, the reality is that a manager

can improve the performance of his or her work groups by empowering subordinates

through effective delegation. Few managers are successful in the long term without

learning to delegate effectively.

The following additional principles may be helpful for managers who have tried

to delegate in the past and failed:

Principle 1: Match the employee to the task. Managers should carefully

consider the employees to whom they delegate tasks. The individual selected

should possess the skills and capabilities needed to complete the task. Perhaps

even more important is to delegate to an individual who is not only able to

complete the task but also willing to complete the task. Therefore, managers

should delegate to employees who will view their accomplishments as personal

benefits.

Principle 2: Be organized and communicate clearly. The manager must have a

clear understanding of what needs to be done, what deadlines exist, and what

special skills are required. Furthermore, managers must be capable of

communicating their instructions effectively if their subordinates are to perform

up to their expectations.

Page| 16

Principle 3: Transfer authority and accountability with the task. The

delegation process is doomed to failure if the individual to whom the task is

delegated is not given the authority to succeed at accomplishing the task and is

not held accountable for the results as well. Managers must expect employees to

carry the ball and then let them do so. This means providing the employees with

the necessary resources and power to succeed, giving them timely feedback on

their progress, and holding them fully accountable for the results of their efforts.

Managers also should be available to answer questions as needed.

Principle 4: Choose the level of delegation carefully. Delegation does not mean

that the manager can walk away from the task or the person to whom the task is

delegated. The manager must maintain some control of both the process and the

results of the delegated activities. Depending upon the confidence the manager

has in the subordinate and the importance of the task, the manager can choose to

delegate at several levels.

2.5.2.1 Delegation of Authority

A manager alone cannot perform all the tasks assigned to him. In order to meet

the targets, the manager should delegate authority. Delegation of Authority means

division of authority and powers downwards to the subordinate. Delegation is about

entrusting someone else to do parts of your job. Delegation of authority can be defined

as subdivision and sub-allocation of powers to the subordinates in order to achieve

effective results.

For achieving delegation, a manager has to work in a system and has to perform

following steps: -

1. Assignment of tasks and duties

2. Granting of authority

3. Creating responsibility and accountability

Delegation of authority is the base of superior-subordinate relationship, it

involves following steps:-

1. Assignment of Duties - The delegator first tries to define the task and duties to

the subordinate. He also has to define the result expected from the subordinates.

Clarity of duty as well as result expected has to be the first step in delegation.

Page| 17

2. Granting of authority - Subdivision of authority takes place when a superior

divides and shares his authority with the subordinate. It is for this reason; every

subordinate should be given enough independence to carry the task given to him

by his superiors. The managers at all levels delegate authority and power which is

attached to their job positions. The subdivision of powers is very important to get

effective results.

3. Creating Responsibility and Accountability - The delegation process does not end

once powers are granted to the subordinates. They at the same time have to be

obligatory towards the duties assigned to them. Responsibility is said to be the

factor or obligation of an individual to carry out his duties in best of his ability as

per the directions of superior. Responsibility is very important. Therefore, it is

that which gives effectiveness to authority. At the same time, responsibility is

absolute and cannot be shifted. Accountability, on the others hand, is the

obligation of the individual to carry out his duties as per the standards of

performance. Therefore, it is said that authority is delegated, responsibility is

created, and accountability is imposed. Accountability arises out of responsibility

and responsibility arises out of authority. Therefore, it becomes important that

with every authority position an equal and opposite responsibility should be

attached.

Therefore, every manager, i.e., the delegator has to follow a system to finish up

the delegation process. Equally important is the delegate’s role, which means his

responsibility and accountability, is attached with the authority over to here.

2.6 Centralization and Decentralization

The general pattern of authority throughout an organization determines the extent

to which that organization is centralized or decentralized.

2.6.1 Centralization

Centralization is said to be a process where the concentration of decision-making

is in a few hands. All the important decision and actions at the lower level, all subjects

and actions at the lower level are subject to the approval of top management. According

to Allen, “Centralization” is the systematic and consistent reservation of authority at

central points in the organization. The implication of centralization can be:-

Page| 18

Reservation of decision-making power at top level.

Reservation of operating authority with the middle level managers.

Reservation of operation at lower level at the directions of the top level.

Under centralization, the top management takes the important and key decisions

and the other levels are into implementations as per the directions of top level. For

example, in a business concern, the father & son being the owners decide about the

important matters and the department heads carry out all the rest of functions like

product, finance, marketing, personnel, and they have to act as per instruction and

orders of the two people. Therefore in this case, decision making power remain in the

hands of father & son.

2.6.2 Decentralization

Decentralization is a systematic delegation of authority at all levels of

management and in all of the organization. In a decentralization concern, authority in

retained by the top management for taking major decisions and framing policies

concerning the whole concern. Rest of the authority may be delegated to the middle

level and lower level of management.

The degree of centralization and decentralization will depend upon the amount of

authority delegated to the lowest level. According to Allen, “Decentralization refers to

the systematic effort to delegate to the lowest level of authority except that which can be

controlled and exercised at central points.

Decentralization is not the same as delegation. In fact, decentralization is all

extension of delegation. Decentralization pattern is wider is scope and the authorities

are diffused to the lowest most level of management. Delegation of authority is a

complete process and takes place from one person to another. While decentralization is

complete only when fullest possible, delegation has taken place. For example, the

general manager of a company is responsible for receiving the leave application for the

whole of the concern. The general manager delegates this work to the personnel

manager who is now responsible for receiving the leave applicants. In this situation,

delegation of authority has taken place. On the other hand, on the request of the

personnel manager, if the general manager delegates this power to all the departmental

heads at all level, in this situation decentralization has taken place. There is a saying that

“Everything that increasing the role of subordinates is decentralization and that

decreases the role is centralization”. Decentralization is wider in scope and the

Page| 19

subordinate’s responsibility increase in this case. On the other hand, in delegation the

managers remain answerable even for the acts of subordinates to their superiors.

2.6.2.1 Implications of Decentralization

1. There are fewer burdens on the Chief Executive as in the case of centralization.

2. In decentralization, the subordinates get a chance to decide and act independently

which develops skills and capabilities. This way the organization is able to

process reserve of talents in it.

3. In decentralization, diversification and horizontal can be easily implanted.

4. In decentralization, concern diversification of activities can place effectively

since there is more scope for creating new departments. Therefore, diversification

growth is of a degree.

5. In decentralization structure, operations can be coordinated at divisional level,

which is not possible in the centralization set up.

6. In the case of decentralization structure, there is greater motivation and morale of

the employees since they get more independence to act and decide.

In a decentralization structure, co-ordination to some extent is difficult to

maintain as there are lot many department divisions and authority is delegated to

maximum possible extent, i.e., to the bottom most level delegation reaches.

Centralization and decentralization are the categories by which the pattern of authority

relationships became clear. The degree of centralization and de-centralization can be

affected by many factors like nature of operation, volume of profits, number of

departments, size of a concern, etc. The larger the size of a concern, a decentralization

set up is suitable in it.

A variety of factors can influence the extent to which a firm is centralized or

decentralized. The following is a list of possible determinants:

The external environment in which the firm operates. The more complex and

unpredictable this environment, the more likely it is that top management will let

low-level managers make important decisions. After all, low-level managers are

closer to the problems because they are more likely to have direct contact with

customers and workers. Therefore, they are in a better position to determine

problems and concerns.

Page| 20

The nature of the decision itself. The riskier or the more important the decision,

the greater the tendency to centralize decision-making.

The abilities of low-level managers. If these managers do not have strong

decision-making skills, top managers will be reluctant to decentralize. Strong

low-level decision-making skills encourage decentralization.

The organization's tradition of management. An organization that has

traditionally practiced centralization or decentralization is likely to maintain that

posture in the future.

In principle, neither philosophy is right or wrong. What works for one

organization may or may not work for another. Kmart Corporation and McDonald's

have both been very successful — both practice centralization. Similarly,

decentralization has worked very well for General Electric and Sears. Every

organization must assess its own situation and then choose the level of centralization or

decentralization that works best.

Page| 21

--Chapter III--

--Industry Profile--

Page| 22

3.1 Industry profile

Modern textile industry in India has its origin in the 19th century. The textile

industry occupies a prominent role in the Indian economy contribution to about 23.5%

of the country’s industrial production. The textiles sector is closely linked with

agriculture, handlooms, power looms, garments manufacturing and a number if

ancillaries in industry and trade. India has the second largest spinning capacity in the

world, after China. In fact, after the expiry of Agreement on Textiles and Clothing, a

number of existing units have undertaken significant expansion of their spinning

capacity.

Textile industry in India is the second largest employment generator after

agriculture. Indian textile and apparel industry, contribute to 3.6% of India’s gross

domestic product accounts for 25% of India export.

The removal of quotas has been advantageous mainly to the developing

countries, which were the main exporters of textiles and clothing products. The world

textile and clothing exports grew by 9.7% in 2006, to US $ 530 billion. Of the total

exports, textiles accounted for US $ 219 billion and clothing for the remaining US $ 311

billion. The world’s largest exporter of textiles (excluding clothing) as a region was

EU25, whereas in case of individual countries, China was topping the list with US $

48.68 billion, followed by Hong Kong (US $ 13.91 billion), USA (US $ 12.67 billion)

and South Korea (US $ 10.11 billion). India stood at the 6th position with US $ 9.33

billion worth exports of textiles in 2006. In case of imports of textiles too EU25, as a

bloc, was leading the list with US $ 70.43 billion followed by USA (US $ 23.5 billion),

China (US $ 16.36 billion), Hong Kong (US $ 13.98 billion), and Japan (US $ 6.18

billion) USA was the largest importer in the case of individual countries. India stood at

the 14th position with regard to import of textiles by individual countries, with a mere

US $ 2 billion.

Developing countries were making an impressive stride in the clothing exports,

as has been in the textiles exports. China was the world’s largest exporter of clothing in

2006, with the export value being US $ 95.39 billion, and constituting to around 31% of

the world exports in clothing, followed by EU25 (US $ 83.42 billion), as a bloc, Hong

Kong (US $ 20.39 billion), Turkey (US $ 11.88 billion) and India (US $ 10.19 billion).

The leading importers of clothing were EU 25, with the import value being US $ 141.15

Page| 23

billion and constituting 44% of the total imports, followed by USA (US $ 82.97 billion)

and Japan (US $ 23.87 billion). The developed countries were having deficits in textiles

and clothing trade for over a decade with USA topping the list with a deficit of US $ 89

billion in 2006. EU held a huge deficit of US $ 56.95 billion, followed by Japan with

US $ 22.63 billion during the same period. Such trade deficits show the low

competitiveness of manufacturing of textile and clothing industry in these countries.

The growth in textile and clothing exports especially by the Asian countries has

been an important trend owing mainly to removal of quotas, increasing

internationalization and liberalization.

3.1.1 History of Textile Industry

English inventors in the 18th century began to automate textile cottage industry

processes including carding, spinning, and weaving. James Hargreaves developed the

Spinning Jenny, a device that replaced eight hand spinners in one operation. Richard

Arkwright assembled these processes and started the first factory on the Derwent River

in Cromford, England in 1771.

Following the American Revolution, several founding fathers felt manufacturing

should remain in England. Alexander Hamilton felt otherwise and wanted to establish a

model mill village in Paterson, New Jersey. His ideas were ahead of their time. The

"National Manufactory" went out of business in 1796.Samuel Slater of Rhode Island

visited several mills owned by Arkwright and associates, memorized the essential

features and returned to the US. In 1792, he opened a yarn spinning mill in Pawtucket,

Rhode Island, the first successful automated yarn spinning in the US. In 1814, James

Cabot Lowell of Boston built a factory in Waltham, up the Charles River from Boston.

Later, the Boston Associates built an entire mill town on the Merrimack River, and later

named it “Lowell" in memory of James Cabot Lowell.

1793 - Eli Whitney and Hogden Holmes developed a simplified method of

removing the cotton lint from the seed. Whitney’s, and especially Holmes' saw tooth

gin, revolutionized the cotton industry by dramatically increasing the productivity of

cotton ginning Gins.

In the early 1800s, cotton was raised in the southern United States and exported

to mills in England and the north. Leaders such as William Gregg of South Carolina

Page| 24

advocated a home-based textile industry for the south but the time was not right.

Northern mills resisted to growth of mills outside New England. Textile machinery was

built in New England. New Jersey and imported from Europe.

After the Civil War, the south slowly replaced slaves with free workers. The

industry remained largely in the north until after the 1880s. Leaders such as Edwin

Michael Holt and family of Alamance County, North Carolina built mills in large

numbers throughout the south as the 19th century closed. Glencoe Cotton Mill and mill

village are preserved today. Cotton mills in New England began to decline in

importance. Merchants contracted for goods through agents. The Cone family moved

from Baltimore to Greensboro and brokered sales. The Belk family bought goods from

Cone to sell in the dry goods stores. Merchants such as Marshall Fields of Chicago

bought goods from mills through intermediaries. Later, in order to better control supply,

the Cones and the Fields built mills of their own, e.g., Cone Mills and Fieldcrest Mills.

Machinery was imported from the north and from Europe.

World War I and the naval blockade imposed by England on German shipping,

and the use of U-boats by Germany to harass English vessels brought the realization that

the United States must be independent of England and Germany for machinery and

dyestuffs. New companies emerged to satisfy the war effort and remained strong for

several decades following the war. World War II once again emphasized the need for

self-sufficiency. Following the war, however, imported machinery and dyes, especially

from Germany and Switzerland, once again supplemented and eventually replaced

domestic supply. American textile companies thrived with the use of imported

machinery and dyestuffs.

In the 1990s, a new world order began to replace the Made in the USA ideas.

Buying from the lowest cost producer drove many textile manufacturers out of the

production side and into imports. Manufacturing companies changed to marketing

companies.

3.2 International Scenario

The textile and clothing trade is governed by the Multi-Fiber Agreement (MFA)

which came into force on January 1, 1974 replacing short-term and long-term

arrangements of the 1960’s which protected US textile producers from booming

Page| 25

Japanese textiles exports. Later, it was extended to other developing countries like

India, Korea, Hong Kong, etc. which had acquired a comparative advantage in textiles.

Currently, India has bilateral arrangements under MFA with USA, Canada, Australia,

countries of the European Commission, etc. Under MFA, foreign trade is subject to

relatively high tariffs and export quotas restricting India’s penetration into these

markets. India was interested in the early phasing out of these quotas in the Uruguay

Round of Negotiations but this did not happen due to the reluctance of the developed

countries like the US and EC to open up their textile markets to Third World imports

because of high labour costs. With the removal of quotas, exports of textiles have now

to cope with new challenges in the form of growing non-tariff / non-trade barriers such

as growing regionalization of trade between blocks of nations, child labour, anti-

dumping duties, etc.

Nevertheless, it must be realized that the picture is not all rosy. It is now being

admitted universally and even officially that the year 2005 AD is likely to present more

of a challenge than opportunity. If the industry does not pay attention to the very vital

needs of modernization, quality control, technology upgradation, etc. it is likely to be

left behind. Already, its comparative advantage of cheap labour is being nullified by the

use of outmoded machinery.

With the dismantling of the MFA, it becomes imperative for the textile industry

to take on competitors like China, Pakistan, etc., which enjoy lower labour costs. In fact,

the seriousness of the situation becomes even more apparent when it is realized that the

non-quota exports have not really risen dramatically over the past few years. The

continued dominance of yarn in exports of cotton, synthetics, and blends, is another

cause for worry while exports of fabrics are not growing. The lack of value added

products in textile exports do not augur well for India in a non-MFA world.

Textile exports alone earn almost 25 percent of foreign exchange for India yet its

share in global trade is dismal, having declined from 10.9 percent in 1955 to 3.23

percent in 1996. More significantly, the share of China in world trade in textiles, in

1994, was 13.24 percent, up from 4.36 percent in 1980. Hong Kong, too, improved its

share from 7.06 percent to 12.65 percent over the same period. Growth rate, in US$

terms, of exports of textiles, including apparel, was over 17 percent during 1993-94 to

1995-96. It declined to 10.5 percent in 1996-97 and to 5 percent in 1997-98. Another

Page| 26

disconcerting aspect that reflects the declining international competitiveness of Indian

textile industry is the surge in imports in the last two years. Imports grew by 12 percent

in dollar terms in 1997-98, against an average of 5.8 percent for all imports into India.

Imports from China went up by 50 percent while those from Hong Kong jumped by 23

percent.

3.2.1 Global factors influencing Textile Industry

The history of the textile and clothing industry has been replete with the use of

various bilateral quotas, protectionist policies, discriminatory tariffs, etc. by the

developed world against the developing countries. The result was a highly distorted

structure, which imposed hidden costs on the export sectors of the Third World. Despite

the fact that GATT was established way back in 1947, the textile industry, until 1994,

remained largely out of its liberalisation agreements. In fact, trade in this sector, until

the Uruguay Round, evolved in the opposite direction. Consequently, since 1974 global

trade in the textiles and clothing sector had been governed by the Multi-fiber agreement,

which was the sequel to an increasingly pervasive quota regime that began with the

Short-term arrangement on cotton products in 1962 and followed by the Long-Term

arrangement. After the successful conclusion of the Uruguay Round in 1994, the MFA

was replaced by the Agreement on Textiles and Clothing (ATC), which had the same

MFA framework in the context of an agreed, ten-year phasing out of all quotas by the

year 2005. The section that follows takes a brief look at the history of these protectionist

regimes as also a more detailed look at the MFA and the ATC.

3.2.2 Multi–Fibre Agreement (MFA)

On January 1, 1974, the Arrangement Regarding the International Trade in

Textiles, otherwise known as the MFA came into force. It superseded all existing

arrangements that had been governing trade in cotton textiles since 1961. The MFA

sought to achieve the expansion of trade, the reduction of barriers to trade and the

progressive liberalisation of world trade in textile products, while at the same time

ensuring the orderly and equitable development of this trade and avoidance of disruptive

effects in individual markets and on individual lines of production in both importing and

exporting countries. Though it was supposed to be a short-term arrangement to enable

the adjustment of the industry to a free trade regime, the MFA was extended in 1974,

1982, 1986, 1991, and 1992. Because of the quotas allotted, the MFA resulted in a

Page| 27

regular shift of production from quota-restricted countries to less restricted ones as soon

as the quotas began to cause problems for the traders in importing countries. The first

three extensions of the MFA, instead of liberalising the trade in textiles and clothing,

further intensified restrictions on imports, specifically affecting the developing country

exporters of the textile and clothing products. Increased usage of several MFA measures

tended to further erode the trust, which developing countries had originally placed in the

MFA.

The MFA set the terms and conditions for governing quantitative restrictions on

textile and clothing exports of developing countries either through negotiations or

bilateral agreements or on a unilateral basis. The bilateral agreements negotiated

between importing and exporting country’s contained provisions relating to the products

traded but they differed in the details. The restraints under the MFA were often

negotiated, or unilaterally imposed at relatively short intervals, practically annually. The

quotas could be either by function or by fibre.

Under the MFA, product coverage was extended to include textiles and clothing

made of wool and man-made fibres (MMF), as well as cotton and blends thereof. With

regard to applications of safeguard measures, import restrictions could be imposed

unilaterally in a situation of actual market disruption in the absence of a mutually agreed

situation. However, in situations involving a real risk of market disruption only bilateral

restraint agreements were possible. The Textile Surveillance Body (TSB) was set up to

monitor disputes regarding actions taken in response to market disruptions.

The MFA permitted certain flexibility in quota restrictions for the exporters so

that they could adjust to changing market conditions, export demands and their own

capabilities. The MFA also provided for higher quotas and liberal growth for

developing countries whose exports were already restrained. The MFA asked the

participants to refrain from restraining the trade of small suppliers under normal

circumstances. In general, developed countries, under MFA, chose not to impose

restrictions on imports from other developed countries

The TSB ensured compliance by all parties to the obligations of bilateral

agreements or unilateral agreements. It called for notification of all restrictive measures.

A Textiles Committee – established as a management body consisting of all member

Page| 28

countries – was the final arbiter under the MFA and worked as a court of appeal for

disputes that could not be resolved under TSB.

3.3 National Scenario

The Indian textile industry is one the largest and oldest sectors in the country and

among the most important in the economy in terms of output, investment, and

employment. The sector employs nearly 35 million people and after agriculture, is the

second-highest employer in the country. Its importance is underlined by the fact that it

accounts for around 4% of Gross Domestic Product, 14% of industrial production, 9%

of excise collections, and 18% of employment in the industrial sector, and 16% of the

country’s total exports earnings. With direct linkages to the rural economy and the

agriculture sector, it has been estimated that one of every six households in the country

depends on this sector, either directly or indirectly, for its livelihood.

A strong raw material production base, a vast pool of skilled and unskilled

personnel, cheap labour, good export potential and low import content are some of the

salient features of the Indian textile industry. This is a traditional, robust, well-

established industry, enjoying considerable demand in the domestic as well as global

markets.

India’s prominent role in textile production stems from its wealth in natural

resources. Silk, cotton and jute, all nature-base fibre resources are available in India.

The textile and clothing industry occupies a unique place in the Indian manufacturing

sector. Having a highly fragmented structure, the Indian textile and clothing value chain

consists of four stages:

Ginning and Spinning –Spinning is the process by which cotton or manmade

fibre is converted into yarn. In case of cotton, before spinning, ginning is done

where the impurities are removed;

Weaving and Knitting –Conversion of cotton or manmade yarns into woven or

knitted fabrics;

Processing – includes bleaching, dyeing, mercerizing and printing, which results

in finished fabric to be used for manufacture of clothing;

Page| 29

Clothing manufacturing this is the final stage where the designing, pattern

making, cutting, embellishing, stitching, finishing, and packaging is done for

distribution.

One of the key advantages of the Indian textile industry is abundant availability

of raw material. Indian textile industry is multi-fibre based using cotton, jute, silk,

manmade synthetic fibres and wool. India is the largest producer of jute fibre, second

largest producer of cotton yarn and silk fibre in the world. Under the man-made fibre

category also, India is one of the major producers in the world; second largest producer

of cellulosic fibre/ filament yarn, third largest producer of viscose staple fibre and

polyester filament yarn, fourth largest producer of polyester staple fibre, and seventh

largest producer of acrylic staple fibre. Value of textile exports from India, including

clothing, was worth US $ 17 billion in 2007-08. Textiles accounted for 48% (US $ 8.3

billion) of exports and the rest 52% (US $8.7 billion) was accounted by clothing. As per

the data collated by WTO, for the year 2006, India accounted for 4.3% of total world

export of textile products, and in the clothing segment India’s share was3.3percentage.

European Union and USA are the major destinations for India’s textile and garment

exports. Other major destinations include United Arab Emirates (UAE), China,

Bangladesh, Saudi Arabia, and Japan.

3.3.1 Indian Textile Industry

The textile industry is the largest industry of modern India. It accounts for over

20 percent of industrial production and is closely linked with the agricultural and rural

economy. It is the single largest employer in the industrial sector employing about 38

million people. If employment in allied sectors likes ginning, agriculture, pressing,

cotton trade, jute, etc. are added then the total employment is estimated at 93 million.

The net foreign exchange earnings in this sector are one of the highest and, together

with carpet and handicrafts, account for over 37 percent of total export earnings at over

US $ 10 billion. Textiles alone account for about 20 percent of India’s total fore

earnings.

India’s textile industry since its beginning continues to be predominantly cotton

based with about 65 percent of fabric consumption in the country being accounted for

by cotton. The industry is highly localized in Ahmadabad and Bombay in the western

Page| 30

part of the country though other centers exist including Kanpur, Calcutta, Indore,

Coimbatore, and Sholapur.

The structure of the textile industry is extremely complex with the modern,

sophisticated and highly mechanized mill sector on the one hand and the hand spinning

and hand weaving (handloom) sector on the other. Between the two falls the small-scale

power loom sector. The latter two are together known as the decentralized sector. Over

the years, the government has granted a whole range of concessions to the non-mill

sector because of which the share of the decentralized sector has increased considerably

in the total production. Of the two sub-sectors of the decentralized sector, the power

loom sector has shown the faster rate of growth. In the production of fabrics, the

decentralized sector accounts for roughly 94 percent while the mill sector has a share of

only 6 percent.

Being an agro-based industry the production of raw material varies from year to

year depending on weather and rainfall conditions. Accordingly the price fluctuates too.

India's trade in textiles and its share in world trade can be categorized as follows:

India’s Trade in Textiles

(1998)

(Table 3.1)

3.3.1.1 Trends in Production

Yarn and production has been growing annually at 1.9% and 2.7% respectively,

since 2000. Yarn production has increased from 3,940-mn kg in 1999- 00 to 4,326--mn

kg in 2004-05. Man-made yarn has driven much of this, showing a robust growth of

Type

India's Share in

World Trade

Yarn 22%

Fabrics 3.2%

Apparel 2%

Made-ups 9%

Over-all 2.8%

Compound Annual Growth Rate

(CAGR) of different segments

Type CAGR (1993-98)

Yarn 31.79%

Fabric 9.04%

Made-ups 15.18%

Garment 6.795%

Page| 31

4.3% in the last five years. Spun yarn production and the cotton yarn sector have also

grown, albeit less impressively, recording growths of 2.4% and 0.6% respectively.

(Figure 3.1)

3.3.1.2 India’s Textile Industry Structure

Cotton textiles continue to form the predominant base of the Indian textile

industry, though other types of fabric have gained share in recent years. In 1995-96, the

share of cotton and manmade fabric was 60% and 27% respectively. More recently,

cotton fabrics accounted for 46% of the total fabric produced in 2005-06, while man-

made fibres held a share of 41%. This represents a clear shift in consumer preferences

towards man-made fabric.

Page| 32

The Textile and Apparel Supply Chain

(Figure 3.2)

3.3.2 Raw Material Base and Capacity in India

Cotton: Cotton is one of the major raw materials for the Indian textiles industry.

India is the second largest producer of cotton in the world, has the largest cultivated

area of over9 million hectares and accounts for around 20% (4.8 million tons) of

global production (over 25 million tons). The performance of the cotton sector has

been increasing over the years and during the cotton season (Aug-Sept) 2007-08; the

output recorded was 310 lakh bales (170 kg each). Even the consumption has been

Page| 33

increasing over the years from 195.03 lakh bales in 2004-05 to 245 lakh bale sin

2007-08, by both mill and non -mill sectors. During 2007-08, India exported 65 lakh

bales of cotton. Technology Mission of Cotton (TMC), Mini mission III, and Mini

Mission IV are some of the developmental measures taken by the Government in

this sector. The cotton sector provides employment to more than 50 million people

in various activities starting from cultivation to trade and processing.

Silk: In the world silk production, India is a distant - second largest producer, with a

share of around15percentage, next to China, which holds a share of 82% in the

world. With a total silk production of around18, 500 MT in 2006-07, India has the

distinction of producing all varieties of silk, viz; mulberry, eri, tasar and muga.

Mulberry accounted for nearly 90% of total silk production in India. The silk sector

provides employment to around six million persons in rural and semi urban areas,

and the majority belonging to the economically weaker sections of the society,

including women. With Japanese technology and cooperation, Indian sericulture

industry is able to evolve and popularize Bivoltine silkworm races, which can yield

raw silk, matching the international standards.

Wool: India is the seventh largest producer of raw wool in the world accounting for

little over 2% of the world production, with about 4.2% of the total sheep

population. Although the woolen textile and clothing industry is relatively small

compared to the cotton and man-made fibre based textiles and clothing industry, yet

the woolen sector plays an important role as it is linking the rural sector with the

textile-manufacturing sector. The product portfolio is also diverse, ranging from

textile intermediates to finished textiles, garments, knitwear, blankets, and carpets.

Indian woolen sector has also a small presence in manufacture of technical textiles,

catering to the civil and defense requirements for warm clothing. Most of the wool

produced in India (around 85%) is of course quality used mainly in the manufacture

of hand-knotted carpets, and 5% is of apparel grade, and 10% is of course grade,

used mainly for production of blankets.

Jute: India is the largest producer and consumer of raw jute in the world. In the year

2006-07, India imported raw jute worth US $ 25 million (over83, 000 tons). During

the period April-February 2007-08, India imported raw jute valued US $ 31.6million

(over 119,000 tons).Export of jute products (including floor coverings) from India

was around US $ 257 million in 2006-07, which has reached to US $ 296million, for

Page| 34

the period April –February 2007-08. There are 77jute mills in India; 60 in West

Bengal, 3 each in Bihar and Uttar Pradesh, 7 in Andhra Pradesh and one each in

Assam, Orissa, Tripura and Chhattisgarh.

Manmade Fibres: The man-made fibre industry comprises fibre and filament yarn

manufacturing units of cellulosic and non-cellulosic origin. The production of man-

made fibres in India has shown an increasing trend in 2007-08, a growth of around

10% over the previous year. India also imports man-made fibres and synthetic &

regenerated fibres for processing and value addition. In the year 2006-07, India

imported man-made fibres valued US $ 555 million, and synthetic and regenerated

fibres worth US $ 97million. In the year 2007-08, during the period April-February,

India’s imports of man-made filament and spun yarn amounted to US $ 578million,

and India’s import of synthetic and regenerated fibres amounted to US $ 100

million.

Current Scenario

The Indian Textile Industry has an overwhelming presence in the economic life

of the country Apart from providing one of the necessities of life; the textiles industry

also plays a vital role through its contribution to industrial output, employment

generation, and the export earnings of the country. The Indian textile industry

contributes about 14 per cent to industrial production, 4 per cent to the country's gross

domestic product (GDP), and 17 per cent to the country’s export earnings. The industry

provides direct employment to over 35 million people and is the second largest provider

of employment after agriculture.

The total cloth production is increased by 10.2 percent during September 2010 as

compared to September 2009. The highest growth was observed in the power loom

sector (13.2 per cent), followed by hosiery sector (9.1 per cent). The total cloth

production during April-September2010 has increased by 2.1 per cent compared to the

same period of the previous year. The total textile exports during April-July 2010

(provisional) were valued at US$ 7.58 billion as against US$ 7.21 billion during the

corresponding period of the previous year, registering an increase of 5.20 per cent in

rupee terms. The share of textile exports in total exports was 11.04 per cent during

April-July 2010. Cotton textiles has registered a growth of 8.2 per cent during April-

September 2010-11, while wool, silk and man-made fibre textiles have registered a

Page| 35

growth of 2.2 per cent while textile products including wearing apparel have registered

a growth of 3 per cent.

India has the potential to increase its textile and apparel share in the world trade

from the current level of 4.5 per cent to 8 per cent and reach US$ 80 billion by 2020.

Textiles and apparel industry exports, valued at US$ 20.02 billion (INR 963.05 billion),

contributed about 11.5 per cent to the country’s total exports in 2008–09. Thus, the

growth and all round development of this industry has a direct bearing on the

improvement of the economy of the nation.

3.4 State -Scenario

The textile sector comprising of spinning and handloom is the single largest

industry in the state. The textile industry is dominated by handlooms, which enjoy a

huge production base and account for 10 per cent of the country’s exports. Total sales of

the sector accounted for 1.8 per cent of sales by industry in the state in 2010. The

handloom industry dominated by cooperative societies, accounts for 86 per cent of the

looms and produces 97 per cent of the state’s textiles. Cotton yarn is the most popular

product in the state followed by knitted garments and fabrics such as cotton and wool.

The textile-processing complex at Kanjikode, the International Apparel Park at

Thiruvananthapuram and the Industrial Export Park at Kochi offer walk-in-and-

manufacture environments.

Hardly 20% of the textiles requirement of the state is met by local production,

which Comprises principally of the handloom and khaki sectors, the power loom sector

(Which produces over 75% of the requirement nationally) not having been encouraged

Adequately in Kerala for fear of aggravating the already problematic traditional Sectors.

The Government desires to con-act this policy on the lines of the Government of India’s

Textile Policy with adequate safeguards to prevent massive redundancies in the

handloom and khaki sectors.

3.4.1 Profile of Textile Sub-Sectors

Organised Mill Sector: As of December 31, 2007, there were over 1,700 cotton-

fibre and man-made fibre textiles mills (non-SSI) in the country with a capacity of

around 35 million spindles, and around 0.5 million rotors. India’s organized mill

Page| 36

sector produced about 4000 million kgs of yarn and over 1700 million sq. mtrs of

cloth.

Power looms Sector: The power looms sector provides a wide variety of cloth, both

grey as well as processed fabrics. As on January 31, 2008, there was 20.83lakh

power looms distributed in over4.64 lakh units, constituting over 60% of the global

power loom age. The sector also contributes around 62percentage to the total cloth

production in the country, provides employment to about 50 lakh people, which

constitutes around 14% of the total employment in the textiles sector and contributes

60% of the fabric, meant for exports.

Handlooms: The handlooms sector has been playing an important role in creating

an awareness of the Indian cultural diversity and fashion, which is unique only to

the Indian textile industry. The handloom cloth production was 6536 million square

meters in 2006-07 and during2007-08, the production of cloth by handlooms sector

was over 7000million square meters.

Readymade Garments: The clothing sector is fragmented and predominantly in the

small-scale sector. It is estimated that there are over 13,000 apparel units (excluding

tailoring units) in India, majority of which are in the SME sector. The total

production of clothing sector was around 8 billion pieces with a value of Rs. 1

trillion during 2005-06; of which over one fourth in quantity terms are being

exported. The clothing sector is concentrated primarily in 8 clusters ,viz., Tirupur,

Ludhiana, Bangalore, Delhi/ Noida/ Gurgaon, Mumbai, Kolkata, Jaipur and Indore.

Tirupur, Ludhiana, and Kolkata are major centers for knitwear, while Bangalore,

Delhi/Noida/Gurgaon, Mumbai, Jaipur and Indore are major centers for woven

clothing. India’s exports of ready-made garments, consisting of cotton, silk, man-

made fibres, wool and other textile materials showed a marginal increase of 0.8%,

from 2005-06 to2006-07; and it is expected toper form marginally better in the year

2007-08.

Technical Textiles: Textile materials and products, which are used for industrial

purposes and manufactured primarily for their technical performance and functional

properties, rather than for decoration, are called technical textiles. The maximum

consumption of technical textiles is in the USA, Western Europe, China and Japan.

These regions account for 65% of the total consumption of technical textiles in the

world. In India, the production of different items of the technical textile industry has

Page| 37

been slowly and steadily increasing. All the twelve items are produced in India in

varied quantities. India has also made notable contribution in the production of

textiles for strategic applications viz. national security, e.g. parachute canopy fabric

used for carrying human, dropping of supply, brake parachute application etc. that

are indigenized and exported to othe0r countries as well. The market size and

potential of technical textiles was estimated at Rs 19,130 crores in 2003-04, and it is

estimated to have reached Rs 30,000 crores in 2007-08.Being an emerging field,

Government of India is launching a (Rs 1000 crore) Technology Mission on

Technical Textiles (TMTT) to ensure that there are necessary profitable benefits

from the enduring investments. To combat the issue of technology backwardness

and infrastructure issues, The Ministry of Textiles, Government of India, plans to

create clusters on technical textiles, so that the necessary textiles may be produced

with adequate technology, thereby making the products technologically competitive

too.

Page| 38

--Chapter IV--

--Company Profile—

Page| 39

4.1 Company Profile

GTN TEXTILES LTD is incorporated on August 2nd, 1962 at Aluva, near

Cochin in Kerala State by G.T. Narayanaswami Naidu and commissioned in 1964; GTN

Textiles was taken over by the present promoters in 1966. The company has its

registered office at Erumathala near Aluva in Ernakulam district. Company has roots in

the textile business for almost 100 years. The founders were from the raw cotton and

yarn trading family business. The flagship of the GTN Patodia group, GTN Textiles

(GTNTL) has several unique distinctions. It was the first company to export cotton yarn

from India to Japan and Italy. In 1992, it exported virtually its entire production,

although it is not an EOU (Export Oriented Unit). Now only 85% is being exported and

the rest is sold in the domestic market because of very good growth in Indian market

and the company has its sales export office at Cochin.

The installed capacity of its plant at Alwaye, Kerala, has been increased from

12000 to 38600 spindles, bringing the company's total spindle age to 60340. GTN

Textiles Ltd is a public limited company with both equity and preference shares. In

Jan.'93, GTNTL came out with its maiden public issue to modernize the existing plants,

meet long-term working capital requirements, and invest in the group's newly promoted

company, Patspin India Ltd.

Over the years, there has been continuous expansion of capacity and

modernization of machines. In the yearly eighties, company shifted its focus

domesticity to the international market and it has benefited immensely from foreign

collaboration. It has followed policy of up gradation of its equipments and adaptation of

state of the art technology. GTNTL is a government-recognized Export House and a

Star Exporter. Perfect Spinners, a group company, also into cotton yarn, was merged

with the company in Apr.'94. It is implementing an expansion-cum- modernization

programme at all its units.

Over 90% of company’s products are fine and superfine hundred percent yarns

carded and combed with counts ranging from 30s to 40s, both single and multi-fold, as

well as gassed, suitable for knitting and weaving.

It is one of the largest cotton yarns exporting organization from India. It exports

to countries like Japan, Italy South Korea, Taiwan. Indonesia, Singapore, Malaysia,

West Germany. The group export especially fine and s uperfine yarns.

Page| 40

GTN Exports and Packworth Udyog are subsidiaries of GTN Textiles. In 2000-

2001, the company has raised term loan of Rs. 22.83 crores under Technology

Upgradation Fund

Scheme which provides for 5% interest subsidy, for marginal increase in capacity and

substantial modernization /replacement of old machinery across the units, by availing

world-class technology. To foray in production of Compact Spun Yarns and to upgrade

its production technology the company embarked upon TUF-II scheme for a total outlay

of Rs. 40 crores. It is also focusing on product diversification, strategic marketing, cost

control measures etc to perform satisfactorily.

During December 2005, the company has decided to demerge its Aluva Unit

along with investment of the company made in Patspin India Ltd and offices as well as

its assets situated in Mumbai, Kolkata, and Coimbatore to GTN Industries Ltd. In

consideration of demerger, the shareholders of the company will get One Equity Share

of Rs. 10/-each of GTN Industries for every One Equity Share held in the company.

Company had achieved TEXPROCIL Award winner for the last 18 years. It has

units at Hyderabad, Nagpur, and Shadnagar. The Patspin India Limited at Palakkad is

the sister unit. It has implemented the ISO 9001 quality standards to ensure that their

products meet the standard and which have helped them improve their export market.

List of Persons / entities comprising Promoters are as follows:

Sl.

No.

Name

Status

No. of

Shares

Percentage

to Paid-up

Capital

1.

SHRI.MADANLAL

PATODIA

Individual

362560

3.11

2.

SHRI.BINOD KUMAR

PATODIA

Individual

508210

4.36

3.

SHRI.MAHENDRA

KUMAR PATODIA*

Individual

742282

6.38

4.

SMT.PRABHA PATODIA

Individual

197480

1.70

5.

SMT.ANJANA PATODIA*

Individual

257166

2.21

Page| 41

6.

SHRI.UMANG PATODIA

Individual

421310

3.62

7.

SHRI.ANKUR PATODIA

Individual

378910

3.26

8.

SMT.MALA PATODIA

Individual

83880

0.72

9.

SMT.SWATI PATODIA

Individual

26680

0.08

10.

MS.PRACHI PATODIA*

Individual

10000

0.23

11.

MADANLAL

PURUSHOTTAMDAS HUF

HUF

121600

1.04

12.

BINOD KUMAR PATODIA

HUF

HUF

579440

4.98

13.

MAHENDRA KUMAR

PATODIA HUF*

HUF

556052

4.78

14.

M.B.CREDIT P LTD

Body Corporate

297458

2.56

15.

PATODIA EXPORTS &

INVESTMENTS P LTD

Body Corporate

320860

2.76

16.

UMANG FINANCE P LTD

Body Corporate

364526

3.13

17.

BEEKAYPEE CREDIT P

LTD

Body Corporate

376871

3.24

18.

EMKAYPEE

INVESTMENTS P LTD*

Body Corporate

489850

4.21

19.

FORWARD FINANCE P

LTD*

Body Corporate

616708

5.30

20.

MODESTY FINANCE &

INVESTMENTS P. LTD*

Body Corporate

120000

1.03

21.

MEGHA INVESTMENTS P.

LTD*

Body Corporate

314760

2.70

(Table 4.1)

Page| 42

* As per the Scheme of Arrangement, Shri.Mahendra Kumar Patodia and his family /

representatives / nominees will swap their Shares of GTN Textiles Limited in favour of

Shri.Binod Kumar Patodia and his family / representatives / nominees. Vice Versa,

Shri.Binod Kumar Patodia and his family / representatives / nominees will swap their

Shares of GTN Industries Limited in favour of Shri.Mahendra Kumar Patodia and his

family / representatives / nominees.

4.1.1 History of the Company:

The Company belonging to Patodia Family – GTN Group is functioning under

the guidance of Shri. M L Patodia, Chairman. The Group, which was originally engaged

in trading in all types of yarns as well as textiles and cotton, acquired vast experience

and understanding of the various aspects of the trade over four decades. The Group, as a

natural corollary entered into the manufacturing of cotton yarn with the acquisition of

Aluva Unit, in 1966. Initially focusing its attention in the marketing of quality yarn in

the domestic market, the group, since 1980, shifted its emphasis to the manufacture of

high quality and finer count yarns for the sophisticated international markets, with a

major share in countries like Japan and Italy. In 1983, GTN established another Unit at

Chitkul Village, Sangareddy Taluk, and Medak District in Andhra Pradesh.

The Company had acquired another Cotton Spinning Unit in Nagpur,

Maharashtra during 1994-95 by virtue of amalgamation of erstwhile Perfect Spinners

Limited, which was promoted by GTN Group. As late as in 1997, the Company further

set up yarn dyeing and mercerizing unit at Shadnagar, Andhra Pradesh. The Company

has also promoted Patspin India Limited, a 100% E.O.U as a joint venture along with

Equity participation from ITOCHU Corporation, Japan and KSIDC, Trivandrum. GTN

has invested 39.07% of the Paid-up Equity Share Capital of Patspin India Limited, a

Listed Company, which also has cotton spinning unit in Kerala.

GTN Group has over 3 decades of experience in the International Market. The

Company’s Aluva Unit is fully modernised by spending over Rs.50 crores with the

latest technology to achieve the optimum productivity meeting the highest quality at par

with the International quality standards. GTN continues to maintain its leadership in

exports of fine and superfine-combed cotton yarns. The Company has been constantly

focusing its efforts to cater to high priced end users in sophisticated markets and enjoys

excellent relations with all of its overseas customers, which have been assiduously built

Page| 43

over the years by strictly adhering to delivery schedules, maintaining consistent quality

and providing prompt after sales service.

In recognition of excellent export performance and leadership in the field of

cotton yarn export, the Company has won the Gold Trophy from TEXPROCIL, for the

last 20 years consecutively for outstanding export performance in yarn amongst

manufacturer exporter mills in the Country. GTN is the pioneer Company in India to

produce specialized yarns like compact yarns for high end users.

GTN Industries Limited was Incorporated under Certificate of Incorporation

No.U18101KL2005PLCO18062 dated 28.3.2005 having its Registered Office at Door

No.VIII/911, Erumathala Post, Aluva, Kochi - 683 105, Kerala for the purpose of taking

over the demerged business of GTN Textiles Limited. Pursuant to the Scheme of

Arrangement, the names of GTN Textiles Limited and GTN Industries Limited were

inter changed and accordingly, the name of GTN Industries Limited has been changed

to GTN Textiles Limited, vide Certificate dated 27.12.2005 by the Registrar of

Companies-Kerala.

Pursuant to the Order of the High Court of Kerala, the Company took over the

business activity of the Aluva Unit, investment of 39.07% of the Paid up Equity Share

Capital of Patspin India Limited and the Offices as well as its assets situated in Mumbai,

Kolkata and Coimbatore with effect from 1st April, 2005 (Appointed Date) on the

Effective Date, i.e.: 19.12.2005.

The principle business of the Company is manufacture and export of cotton yarn.

The main objects are set out in the Memorandum and Articles of Association and

interalia allows engaging in various business including those as spinners, weavers,

bleachers, dyers of cotton yarn, producers of processed yarn, mercerised yarn, dyed

yarn, bleached cotton yarns, etc.

Vision

The vision of GTN is to realize their policies and implement the contents there in letter

and spirit.

“The market place is the driving force behind everything we do and we aim and achieve

the highest level of customer satisfaction on a continuous basis in all our transactions”.

Page| 44

GTN believes in continuous up-gradation of its product quality &services by

investment in the latest technology and its successful implementation

Mission

It is the mission of GTN to realize the zero defect zero accidents zero pollution and

thereby to have zero losses and also implicit trust, high ethical, moral values and

unswerving commitment to our customers. The exceedingly high standard we set for

ourselves is the driving force behind the quality and excellence of all our endeavors.

4.1.2 Main Objects of the Company

The Main Objects of the Company as set out in the Memorandum of Association are as

follows:

a) To carry on all or any of the businesses as manufacturers, distributors, producers,

assemblers, fabricators, designers, hirers, repairers, cleaners, exchangers, alterers,

buyers, sellers, importers, exporters, stockiest, agents, representatives, storers and

warehouses and dealers in textile industry and other allied industries.

b) To carry on the business of preparing, combining, spinning, doubling, twisting,

texturising, imparting, crimping, converting, calendaring, testing, sizing, weaving,

knitting, bleaching, processing, dyeing ginning, cutting, scouring, winding,

mercerising, combing, printing, finishing, manufacturing, buying, selling, importing,

exporting or otherwise dealing in industrial fabrics, synthetic fabrics, synthetic yarn,

cotton yarn, nylon, nylon tyre yarn, tyre cord, tyre fabrics and other end products,

polyester, acrylic, viscose, poly propelene cotton, linen, wool, silk, flex, hemp, jute,

artificial silk rayon, canvas and other fibres or textile substances whether natural or

synthetic or manmade, in any state and whether similar to the foregoing substances

or not, and to treat, utilise and deal in any waste arising from any such operations

and to manufacture, felted, knitted, looped and embroidered fabrics, lace and other

types of manufactured, processed or decorated fabrics and to manufacture coated or

laminated fabrics and readymade garments and apparels.

Objectives of the Company

(i) Corporate Objective

a) To improve its present position in export markets.

b) To satisfy its customers and shareholders

Page| 45

c) To concentrate more on high value added processing at yarn

d) To maintain long-term relationship with customers to provide then with good

service and better quality products.

(ii) Quality Objective

a) To meet changing global demands for specialized yarn.

b) Ensuring better quality by its commitments to social and environment needs.

c) Motivating personal for ensuring quality awareness of all level.

d) Continue upgradation of product quality and technology supported by research

and development effects in cost effective manner.

e) Highest level of customer satisfaction by meeting stated and perceived

requirement maintaining consistency and timely delivery.

4.1.3 Awards/ISO Cerfication

Winner of Texprocil award for outstanding exports achievement for the last 18

consecutive years.

Texprocil Gold

1993-94, 1994-95, 1995-96, 1997-98, 1998-99, 1999-2000, 2000-01, 2001-02, 2002-03

Texprocil Silver

1985-86. 1986-87, 1988-89, 1989-90, 1990-91, 1991-92, 1992-93, 2006-07

(GTN Enterprise Ltd.)

Texprocil Bronze

1996-97, 2002-03, 2003-04, 2004-05, 2006-07 (GTN Textiles Ltd.)

The award for excellence from Birla Economic and Textile Research Foundation

GTN is named the ‘STAR EXPORTER’ and ‘EXPORT HOUSE’ for its excellent

performance in export 2003-04.

GTN has the Birla award for its research and development and modernization efforts

1997-98.

National export award for outstanding performance 1987-98 by Government of

India, Ministry of Commerce.

SIMA Diamond Jubilee, 1993-94 Shri B K Patodia, Vice Chairman.

Cochin Special Economic Zone Export Excellence Award, 2000-01, ‘01-02, ‘02-03.

Page| 46

In recognition of the leadership enjoyed by the company in the field of cotton yarn

export, the textile export promotion council has awarded yet another gold trophy for the

year ended March 98, which is being received by the company in the past nine years.

4.1.3.1 ISO 9001&14001

ISO 9001&14001 -2004 were implemented GTN textiles limited Aluva in the

year 1994 and 2004 respectively. Both these system were integrated in the year 2006

and termed as “Quality Environment Management System” (QEMS). The system is

audited and certificate is issued by “intertech” an international organizational dealing

with the international standards and operating in India. By integrating both these

system, the company has the advantages of reducing the number if audits preparation of

document.

The ISO 9001 model of the quality system is built up on the principle of achieving

customer satisfaction by preventing non-conformity at all stages in the supply chain.

4.2 Competitors

The major competitors of GTN Textiles LTD are-

Arvind Mill Ltd

Raymond’s Ltd

Centuary Textiles & Industries Ltd

Reliance Textiles Ltd

Ginni Filaments Ltd

Hanil Era Textile Ltd

Vardhaman Spinning Co.

Page| 47

Organizational Structure of GTN Textiles Ltd

(Figure 4.1)

Chief Executive

Senior GM

Personnel & IR

Senior GM

Manufacturing

Deputy GM Technical Asst GM

Finance

&

Accounts

Sr.

Mgr

T & D

Sr. Mgr

Manufact

-uring

Head

Security

Guard

Mgr

Personnel

Security

Guards

Ship In-

Charge

Supervisor

Sr. Mgr

Engineering

Service

Electrical

Engineer

Asst. GM

Raw

Materials

Mechanical

Engineer

Electronics

Engineer

Mgr Raw

Materials

Asst.

Manager

Maintena

-nce

Asst. GM

Maintena-

nce

Supervisor

Jr. Officer

Time Office

Time

Keepers

Asst. Mgr

Security &

Welfare

Sr. Officer

Time Office

Group Technical Advisor

Store Asst.

Deputy Mgr

Finance &

Accounts

Asst. Mgr

Q & A

Senior

Officer

Q & A

Assistants

Accounts

Assistants

Sr. Officer

Q & A

Asst. Mgr

Finance &

Accounts

Chairman & Managing Director

Page| 48

4.3 Duties and Responsibilities of Departmental Heads

Chairman and Managing Director

Overall management of the group administration and review of systems for

quality, export, perspective planning, expansions, resources funding and raw

materials (cotton) procurement.

Defines and documents company's quality, policy, and objectives.

Chief Executive

Overall management of organization, administration, and review of system for

quality export perspective planning and expansion.

Overall management of purchase of capital equipments, spares and products

effecting quality.

Planning for expansions, resource funding, and control of finance department.

Senior General Manager (Manufacturing)

Managing and control of production process, product identification and

traceability, material handling, storage packaging and delivery.

Overseas the quality Management system that is being maintained in the

organization.

Identify and advise motivation programs for employees. He has overall control

of the worker.

Senior Manager (Engineering Services)

Overall control of utilities, civil, mechanical, and electrical activities.

Implementing n effective scheduled preventive maintenance program for utility

equipment.

Repairs and services of humidification or air conditioning plant.

Senior General Manager (Personnel and Industrial Relations)

Implementing systematic recruitment procedures, providing training facilities

and overall development and motivation of all employees.

Maintaining documentation of training programs.

Ensuring safety aspects in the organization.

Page| 49

Assistant General Manager (Maintenance)

Implementing an effective scheduled preventive maintenance program.

Repair and service of process equipment, calibration of gauges.

Communication with Senior GM Manufacturing

Assistant Manager (Quality & Assurance)

Establishing and maintaining inspection and test procedures for raw materials, in

process and final product.

Establishing and maintaining procedures for calibration of inspection measuring

and test equipment.

To implement research and development and quality improvement activities.

Reporting on the performance of the quality management system to the

management for review and as a basis for continual improvement.

Communication with external bodies on matters relating to quality management

system.

Timely conduct to Internal Quality Audits by trained personnel.

To organize and conduct management review at specified internals and initiate

follow-up-actions.

Manager (Maintenance)

To assist Assistant Manager (Maintenance) for process equipment maintenance,

repair and servicing.

Responsible for maintaining and servicing of all equipment.

Calibration of gauges and other measuring equipment.

Manager (Production)

Monitoring of all production, packaging, and delivery activities.

Ensuring good housekeeping in the organization.

Manager (Raw Material)

To control the distribution of the raw material to our units.

Assistant Manager (Quality Assurance)

Assist management representative in controlling of quality manual and matters

related to there to.

Page| 50

Assistant Manager Accounts

Provides finance assistant to various departments as per the requirements

Maintains the wages and salary bill of the department

Helps in assisting the manager in preparation of various accounts

Maintains records on the past as well as current financial figures, engages in

management discussions etc.

Store Assistant

Maintains records of stocks and reduces wastage

Supervises packaging

Reports storage and delivery of finished products

Informs executives in case of shortages

4.4 Various Department of GTN Textiles Ltd

1. Raw Material Department

2. Quality Assurance Department

3. Production Department

4. Stores Department

5. Maintenance Department

6. Management Information Systems Department

7. Finance Department

8. Personnel Department

9. Sales, Export/Marketing Department

Page| 51

4.4.1 Raw Materials Department

Introduction

Cotton is the sole raw material for the manufacture of cotton yarns. Since it is a

seasonal product and is available only during the months from October-March, the

required quantity is purchased and stocked for the production of cotton yarn. The fiber

processors seek to acquire the highest quality at the lowest price, and attempt to meet

processing requirements by blending bales with different average fiber properties.

Blends that fail to meet processing specification show marked increase in

processing disruption and product defect that cut into the profits of the yarn and textile

manufacture

The cotton picked folds are ginned and taken to the factory site from the ginning

centers through agents. The purchase is done on a massive scale, before which the

material undergoes a series of tests. The basic sample considered should satisfy three

parameters viz. Sample length, strength, and value. Once the sample clears this high

volume instrument testing, the company goes for bulk purchase on lot basis. These

samples again undergo the quality check which once cleared for delivery. The approval

lot again undergoes HVI tests. Once cleared these lots are accepted for manufacturing.

Functions:

Verification of properties

Finding suppliers

Import of cotton

Purchase of raw materials

Waste management

Procedures

1. Verification of Properties

Successful processing of cotton depends on appropriate management during and

after harvest of those highly variable fibre properties that have been shown to affect

finished – product quality manufacturing efficiency. If fibre – blending specific end

uses and profitability, production managers in textile mills need accurate and effective

Page| 52

descriptive and predictive quantitative measures of both the means and ranges of these

highly variable fibre properties.

The components of cotton fibre quality are usually defined as those properties

reported for every bale which currently include length, length uniformly index, strength,

micron ire, and yellowness (+b), and trash content, all quantified by the High Volume

Instrument Line (HIV).

2. Finding Suppliers

Cotton is produced from different cotton producing states of India i.e. Gujarat,

Maharashtra, Karnataka, Andhra Pradesh, Tamil Nadu, Punjab, Haryana etc. The

various varieties of Indian cotton are J34, S6-S4, V797, Y-1, JAYADHAR, MECH,

BRAHMA, DCH, DIGVIJAY, H-4 etc. A part from these American Supima, Giza45,

Giza70, Giza77, Giza76, Giza86, Giza85, and Giza80 which are imported from

America, Egypt and Sudan are used for processing cotton yarns.

Earlier the company used to depend solely on Indian cotton, but the quality was

not up to the mark as it was contaminated with foreign particles. Later imported cotton

was used and now 90% of American cotton is used.

3. Import of Cotton

The company purchase more than 40% cotton raw materials from foreign

countries like America and Egypt. The main reason or import is better quality and

productivity. Raw material used for production is Suvin. One of the finest extra long

staple cottons available in the world. Suvin cotton is superior in all aspects like fineness

Staple length, silkiness, and luster. This exclusive cotton of Indian origin is a luxury and

its products are considered premium and niche worldwide.

a) Supima

It is a superior, extra long staple variety of cotton grown in America. Yarns

produced from Supima cotton are used to produce softer and more lustrous fabrics.

Supima represents highest quality in cotton yarns. GTN is the first spinning company in

India to obtain a Supima trademark license.

Page| 53

b) Egypt Giza

Giza cotton is a true mark of excellence with extremely superior quality in the

extra long staple and long staple variety. These varieties are also renowned for their

excellent fitness and feel.

c) Indian Cotton

GTN use high quality variety of MCUS and Shanker cotton known for their

superiority in terms of fitness and goodness.

d) Australian Cotton

Medium staple contamination free, varieties of cotton and one of the best grades

of raw materials from among the best suppliers.

e) American sjv Acala

GTN was the first Indian spinner to be given a cotton USA license. Medium

staple contamination free, varieties of cotton and one of the best grades of raw materials

from among the best suppliers.

4. Purchase of Raw Materials

The purchase is based on the three production plan made by the departments

according to the forecasted requirements for production. The production plans does not

allow shortage as it can lead to heavy loss. Random samples of the purchased cotton, is

tested in the quality lab for fiber quality specification. Test for fiber fitness is conducted

as spinning larger number of finer fibers together results in stronger, more uniform

yarns than if they hard be made up of fewer, thicker fibers. The 4 ultimate acceptance

tests for fiber color, as well as for finished yarns and fabrics is the human eye. Therefore

instrumental color measurement must be correlated closely with visual judgment.

Since GTN has its own cotton trading division, it has great advantages of buying

raw materials throughout the year. The purchase order of other companies in the group

is placed by the GTN Textiles, Aluva.

Page| 54

5. Waste Management

Long fibers are best suited for yarn production. Short fiber content is defined as

the percentage of fiber less than 12.7mm the short fibers obtained as waste from

processing is packed and sold.

Key factors for success

Procurement of the right quality at right at right time.

Ability to procure large quantum of raw material and keep long time stock

which ensures consistent quality.

The GTN has an associated concern trading in cotton for the last 40 years which

gives it added advantage.

Organization Structure- Raw Materials Department

(Figure 4.2)

Group Technical Advisor

Sr. GM Manufacturing

Asst. GM Raw Material

Store Assistant

Manager Raw Material

Page| 55

4.4.2 Quality Assurance Department

Introduction

This department is responsible for the quality assurance of raw materials, quality

assurance in process and quality of finished goods. The department is also responsible

for implementation of research and development quality improvement activities in the

organization and also tries to establish and maintain procedure for inspection,

calibration of measuring and testing equipments.

The department is situated inside the factory with state-of art laboratory for

testing the quality of cotton yarn at various stages of production and the finished goods.

Some of the machines used in the quality assurance department are USER Spin Lab

excusing these machines, testing is done for the raw materials and finished goods. GTN

Textiles Ltd., Aluva is ISO 9002 for quality assures in production, installation and

servicing. The company has a quality manual that makes commitments to the customers

that they shall comply with all their requirements for improvement in all the activities to

serve them.

Quality assurance department is the department where the quality is checked and

there are various parameters that affect the quality of cotton fiber, some of them are

length, evenness, fiber strength. These parameters are tested in the quality assurance lab.

Quality Policy

GTN textiles would ensure manufacturing and marketing of cotton yarn by complying

with:

GTN Textiles Ltd. Would achieve the highest level of customer satisfaction by

meeting their slated and perceived requirements, manufacturing consistency and

timely delivery.

GTN 55endeavors continual up gradation of product quality and technology

supported by R&D efforts in a cost effective manner.

To meet the changing global demands and stay headed in competition GTN

would adapt/ innovate methods in its manufacturing activities.

GTN would inculcate a sense of quality awareness at all levels by using

appropriate training and motivation techniques.

Page| 56

GTN would aim at preserving the environmental conditions by adopting eco-

friendly measures in its manufacturing and other activities.

The main activities of QAD are:

Raw material selection and stock

Bale management

Online process monitoring of production and quality

100% zero / quantum clearer

UV lamp testing

Duties & Responsibilities

Senior Manager: Takes care of the overall administration of the quality assurance

department

Assistant Manager (Quality): Takes care of process control and development of new

products

Supervisor: Process control is monitored by the supervisor

Investigator: Inspection and testing of materials is done by the investigators

Levels of inspection

There are mainly three levels of inspection and each has different checking intervals

Raw Materials: the inspection and testing is immediately. Both are thus quality

assurance involves all those planned and systematic action necessary to provide

adequate confidence that product will satisfy the given requirement for quality

essential for continuous processing.

In Process: during each process, random samples are taken and tested. This is to

ensure the customers quality requirement.

Final Products: The product has to be tested before shipping. Usually a lot may

contains 7-8 tons random samples are taken from the lot and tested

Quality Lab

Twist per inch test: to improve the strength of the yarn, two yarns are twisted to

form a single strand. To determine the number of twists in an inch the test

conducted.

Linear density test: in this the count of the yarn is tested. This is to ensure that

the yarn has the required count.

Page| 57

Tensile Property Test: the strength of the yarn is tested. The extent to which the

fibre can elongate is tested to avoid frequent broken end.

Unevenness Test: the presence of short fibre result in the unevenness of the yarn.

Use of uneven yarn in fabrics can cause bubbling in course of time. To avoid this,

the yarn is gassed

Cotton testing: cotton is tested for its fibre length, colour, and strength.

Organization Structure- Quality Assurance Department

(Figure 4.3)

Group Technical Advisor

Sr. Officer Q & A

Asst. Mgr. Q & A

Operators

Deputy GM Technical

Q & A Assistant

Page| 58

4.4.3 Production Department

Introduction

Production department is the most important part of this organization. Here

production is carried out in required quality at minimum cost. The production

department in coordination with the marketing division does managing and controlling

of the production process. Customer requirement in terms of quality, quantity, delivery,

packaging are obtained an analyzed as per the sales contract from the export division.

Production capacity

GTN have 165000 Spindles Capacity, consisting of 30000 Compact spindles, and

135000 Ring spinning .In addition process like twisting, Gassing, Dye package winding

,knitting etc. in-house in order to server different customers requirements effectively.

Product

The reason for success in this competitive environment is that all the products are

customized and are produced on a ‘made to order bases’

GTN’s Product Range

GTN group manufacture 100% cotton yarn/knitted fabrics:

Yarn of count 30’s to 140’s

Two for one twisted & Ring double

Knitting & Weaving yarn

Gassed yarn

Gassed and processed knitted yarn

Knitted garments

Main Counts

Over 90% of products are fine and superfine hundred percent yarns carded and

combed with counts ranging from 30s to 140s, both single and multi fold, as well as

gassed, suitable for knitting and weaving.

Page| 59

Flow Chart of Production Process

(Figure 4.4)

Production Process

The production process is mainly going through five stages:

1) Bale opening: In this process cotton are opened, foreign matters are segregated

and processed in the bale-opening machine. From this process, cotton is subject to

maximum.

2) Mixing: Here different varieties of cotton are blended in define proportion. The

objective of blending different varieties of cotton is to spin the required yarn

economically. Unimix is the machine that is used to mix the cotton and to convert

into chute.

Stack mixing is the best way of doing the mixing compared to using automatic

bale openers which picks up the material from 40-70 bales depending on the

length of the machine and bale size, provided stack mixing is done perfectly.

Improper stack mixing will lead to shade variation problem, stack mixing with

Bale Opening

Mixing

Blow Room

Drawing

Combing

Carding

Simplex Spinning Automatic Cone

Winding

Doubling Conditional

Winding Singeing

Conditional Yarn Precision

Winding

Page| 60

bale opener takes care of short term blending and two mixers in series take care of

long term blending.

3) Blow Room: In this, the mixed cotton is opened, cleaned and made into a

continuous sheet in the wound from. This product is called Blow Room Lap.

4) Carding: In carding operation, the Blow Room Lap material is cleaned, fibers are

made parallel and then wastes are extracted from fibers and assemble into a

continuous strand. This strand is called Card Silver. This silver are coiled and

stored in cans.

There are two rules of carding:

The fiber must enter the carding machine, be efficiently carded and taken from it

in as little time as possible.

The fiber must be under supervision from entry to exit.

The purpose of carding:

To open the flocks individual fibers

Cleaning or elimination of impurities

Elimination of dust

Elimination of short fibers

Fiber blending

Fiber orientation or alignment

Silver formation

5) Combing: The carded silver is then prepared for combing in Silver Lap and

Ribbon Lap machines. The product thus prepared is called Ribbon Lap. These

Ribbon Laps are then fed to comber machine. In comber, the short fibers and

minute impurities are removed and the fibers are made parallel and assembled in

from of Silver.

6) Drawing: In drawing process, a definite number of combed silver is doubled and

drawn together to make the resulting silver more even and parallelized fibers. The

silver is stored in cans in coiled form.

7) Simplex: The object of simplex or speed frame process is to attenuate the drawn

silver into a finer strand, twist and wind it on a plastic tube. This product is called

Roving.

8) Spinning: In Ring Spinning process the roving is attenuated with the help of

drafting system and the drafted fiber strand is twisted and wound on a tube. The

Page| 61

twisting and winding operations are performed with the help of Ring Traveler and

Spindle. The yarn count is also set at this stage. The arrangement is being progress

to spin the latest form of compact yarn by the employment of Elite and Com4

machines.

9) Automatic Cone Winding: In the automatic cone winding process, yarn from the

Ring Frame cops passed through electronic yarn cleaners to detect and remove

objectionable fault in the yarn. The yarn ends are joined with the splicing

provision. A definite length of yarn will be wounded on cones. Waxing can also

be done in this process.

10) Doubling: In doubling process, two or more single yarns are twisted together.

This consists of two processors - assembly winding and twisting. In assembly,

winding the required number of single yarns of definite length is wound in parallel

to a single package. Twisting may be carried out either with Ring Doubling

machine or two-for one twister.

11) Conventional Winding: In conventional winding a definite length yarn is

wounded on cones. During winding the yarn is passed through electronic yarn

cleaner to detect and remove objectionable yarn fault waxing also can be done in

this process.

12) Singeing: In singeing process yarn is passed through a flame at high speed to

remove the protruding fibers. The object of singeing is to make the yarn lustrous,

which can be used for some special end uses. The flame and speed of the fiber

should be constant as any change can cause damage to the yarn.

13) Conditional Yarn: Apart from gassed yarn conditioned yarn is also produced.

According to the customer requirement the yarn is conditioned in a conditioning

machine. The yarn is conditioned for half an hour in specific temperature and

moisture. The time limit is important as over conditioning may lead to absorption

of moisture by the yarn and hence may result in poor quality.

14) Precision Winding: In this process yarn is passed through a special type of

tension assembly to get the package more softly so as to get the dye package

directly. The softness can be increased or decreased as per the requirement.

Page| 62

Organization Structure- Production Department

(Figure 4.5)

Group Technical Advisor

Sr. GM Manufacturing

Ship In- Charge

Supervisors

Page| 63

4.4.4 Stores Department

Introduction

Stores department is the department whose main service is maintaining several

types of inventories. Also it functions as maintenance of materials, spare parts and

general store as required. Purchase is made with reputed companies who offer good

quality of products at reasonable cost.

Functions:

Storing of purchased raw material

Issuing reorder level

Material inspection

Listing and selling of scrap

Procedure

Storing of Raw Material

It is the duty of the stores department to store the purchased raw material. All the

purchases are made online. SAP is the software used for this purpose. The purchases are

made through quotations for a period of six months. Quotations are received from

dealers who provide maximum discount.

Mainly 3 type of material are purchased and stored,

Mill stores: this includes spear parts, bearings, consumable goods etc.

Packing goods: these include material which is used for packing.

Utility item: this include engineering items, electric items etc.

All purchases are made within the limit of 8-12 days and on the same day itself it is fed

into the computer.

Issuing Re Order Level

All the purchase and issue of raw materials are entered in the computer and

computer will show the re order level.

First Release

The requirement of each department is listed out by the respective department

staff. This list is then sent to the department head.

Second Release

The list prepared by the department is approved by the department head and then

sent to the vice-chairman

Page| 64

Order Placement

After the second release, the requirement list is sent to the stores department,

where the order is placed. The description and quantity of the product is

specified in the order form.

Order Release

The store manager places the order with the suppliers and is known as order

release. The re order time and lead time is estimated with the help of past record.

Tax free goods are specified.

Order Acceptance

The order acceptance is the receipt of goods ordered. The quantity of the item is

checked by the stores department.

Material Inspection

The quality of the items delivered by the suppliers is inspected by the

investigators in the quality assurance department. Then the materials are issued to the

respective departments. The purchase entry is also made during this time. The items

received by the stores department are stocked in the stores.

Monthly reports are generated. Consumption reports are generated to find out the

consumption rate. These reports are also used to tally the physical stock with

consumption.

Listing and Selling of Scrap

The scrap materials are listed out once in every six months. A call for quotation is

made to find the best price that can be obtained for scrap. ABC analysis is used for

regular items, which directly affect the quality like packaging materials and machinery

spares.

Organization Structure- Stores Department

(Figure 4.6)

Worker

Stores Assistant

Manager Raw Materials

Page| 65

4.4.5 Maintenance Department

Introduction

GTN being a manufacturing concern, the number of equipments and machines

are involved directly or indirectly with production process and hence the effective

functioning of maintenance department is inevitable.

The objective of maintenance department includes minimizing long run

maintenance cost, minimizing breakdowns to keep operations stable, providing reliable

conditions for equipment to perform at specified technical conditions through service,

repairs replacement and modifications. They conduct the preventive maintenance

program at intervals intended to reduce the like hood of equipments conditions falling

below a required level of acceptability and also modernization works are done by the

department.

In order to assist maintenance department, computers are provided with the

details and reminder dates of the maintenance of a machine in a department and details

of its services and replacement. All the machines are cleaned periodically and their

functioning is checked in order to assure that the machines are working smoothly with

no troubles. Other than daily checks, weekly, monthly or yearly checks are carried out.

A time interval is set for all machines. A monthly schedule is prepared to see which

machine is to be attended first and then at the time the concerned foreman will attend

the machine.

GTN Textiles being s manufacture of fine and super fine quality cotton threads,

modernization has become the inevitable part of the production. Replacement of

machines and machine parts also is done by this department. Good quality machines are

selected according to the count rate.

Functions:

Minimizing maintenance cost

Minimizing breakdowns of machines

Replacement and modification of machine

Providing safer working condition

Ensure machine are working properly

Page| 66

The maintenance operations are divided into two:

Preventive Maintenance

The manager and other concerned officers will fix the life of all machines spare

parts and will replace the particular spare part at the end of the period. All the

machines used in the company (Indian as well as imported ones) are under the

annual maintenance contract. So the serious mechanical problems are rectified by

the company, who supplied the machines.

Breakdown Maintenance

If any faults occur at any part of the machine, the assigned person from the

maintenance department will check out the problem and repair the part.

Levels of Maintenance

Mechanical Maintenance

To ensure the protection is carried out in a controlled condition.

Electrical maintenance

Ensure that process equipment or machinery are maintained and fit for the

purpose.

Organization Structure- Maintenance Department

(Figure 4.7)

Group Technical advisor

Sr. GM Manufacturing

Asst. Mgr. Maintenance

Asst. GM Maintenance

Page| 67

4.4.6 IT/ Management Information System Department

Introduction

About 90% of the organization is computerized. The main network is the

SAP/ERP implemented within the raw material finance, export and stores department.

Other applications like Payroll Software in Fox Pro and Production Control in visual

basic are implemented in the organization.

Functions:

Maintenance: The System has to be maintained and updated according to the increasing

needs of the organization

Process Monitoring: The production process is completely monitored by the

department.

The Payroll Software is handled by the personnel department. The wage and

salary calculation is done using this software. The organization provided intranet

facilities for ease of access of information. The intranet is accessible by the top level

management. The main server is at Cochin through which the transactions are

communicated. The information regarding the transactions are shared and passed to the

organization through routers.

Organization Structure- Management Information Systems Department

(Figure 4.8)

Deputy General

Manager

Technical

System Analyst

System

Administrator

Programmers

Page| 68

4.4.7 Finance Department

Introduction

This department has to raise necessary funds, manage them, prepare finance

budgets and administer its working capital. This department functions on public issue of

capital, maintains records for helping the finance manager to access the appropriateness

of capital structure. It provides data for the preparation of budget and various financial

statements. The accounting function of the department includes the preparation of trial

balance on a yearly basis. They also prepare managerial reports regarding expenditure

of travelling, postal, telephone and courier transactions.

Functions of Finance Department

The company maintains a clear and perfect accounting system. The main activity

of the finance department is working capital management. Preparation of fund flow

statement, cash flow statement, balance sheet, profit and loss accounts are also the

activities of finance department. Secretarial work relating to board comes under the

finance department. Most of the activities carried out by the finance department are

preparing to long term and short term requirement of the operation, closing purchase

bill, maintaining the account contractors, subcontractors, income tax deduction, salary

discrepancy, dealing with the financial institutions with import and exports

Maintaining Books of Accounts like,

a. Purchase Records

The finance department of the company keeps the account of raw material and

accounting entries are made in the books of accounts of the company. The department

analyses the details of purchase afterwards.

b. Salary Accounts

The main function of the department is preparation and disbursement of salary of

officers, office staff and workers. The department keeps salary register pertaining to

each of the above said person and facilitates charges in salary due to granting of annual

increment and deduction from the salary. The department is maintaining sub ledgers for

deduction made in the salary such as PF, insurance premium advance and income tax.

Another important function is computation of income tax.

Page| 69

c. Sales and Revenue Accounts

The department functions on calculation of paying sales tax and central excise

duty to the concerned government every year, provision for current tax is made on the

basis estimated taxable income for the current accounting year in accordance with

income tax 1961.

d. Cash and Bank Accounts

The department does all the matters relating to the day to day cash transactions.

They receive and make payment for purchase and sales.

e. Cost Sheet

Annual budget and cost sheet is prepared at the outset of every year and the

company is following Process Costing Method. It helps the company to ascertain the

cost of a product at each stage of the production, i.e. cost at each process through which

the raw cotton passes through for the production of fine yarns. The total cost incurred at

each stage of production is carried out to ascertain the final cost. The pricing policy

adopted by GTN Textiles is Cost-plus-pricing and hence a certain percentage of the

profit is added to the final cost incurred.

f. Depreciation

Department has been provided at the rates and in the manner prescribed in

Schedule XIV to the Companies act 1956. Plant and machinery and electrical

installation have been, on technical assessment, considered as continuous process.

Accounting System

The financial statements are prepared on historical cost and convention.

All fixed assets are stated at cost adjusted by revaluation in case of certain land,

building, plant and machinery and electrical installation, less accumulated

depreciation.

Long term investments are stated at cost less provision.

Values of fixed assets are revalued by technicians.

Valuation of investment is done at cost.

Depreciation is done as per the company’s act 1956.

Management of Payables and Receivables:

As 90% of the sales are as exports, it takes place with the support of letter of

credit or bank guarantee. Therefore, management of payables and receivables has not

Page| 70

been a problem for the company. In this total amount, 50% of the total amount is written

off as bad depts. Likewise 80% of the raw cotton purchased is imported. So L/C is made

us here too. Local purchase is made by the company for a credit period of 30 to 90 days.

The company claims to have an efficient management of both payables as well as

receivables.

Accounting Policies:

Basis of Presentation:

The financial statements have been prepared to comply with the mandatory

Accounting Standards issued by the Institute of Chartered Accountants of India and the

relevant provisions of the Company’s Act, 1956. The financial statements have been

prepared under the historical cost convention, 0 the basis of a going concern, on accrual

basis.

Use of Estimates:

The preparation of financial statements requires Management to make estimates

and assumptions that affect the reported amounts of assets and liabilities and the

disclosure of contingent liabilities on the date of financial statements and reported

amounts of revenue and expense of that year. Actual result could differ from these

estimates. Any revision to accounting estimates is recognized prospectively in current

and future periods.

Fixed Assets:

i. All fixed assets are stated at cost less accumulated depreciation. Expenditure

during construction period in respect of new project/ expansion is allocated to the

respective fixed assets on their being ready for commercial use. Also refer Policy

G and J below.

ii. Impairment of Assets the company assesses at each Balance Sheet date whether

there is any indication that any asset may be impaired. If any such indication

exists, the carrying value of such assets is reduced to recoverable amount and the

impairment loss is charged to Profit and Loss account. If at the Balance Sheet date

there is any deduction that a previously assessed impairment loss no longer exists,

then such loss is reversed and the asset is restated to that effect.

Page| 71

Investments:

Long term Investments are stated at cost less provision, if any, for other than

temporary diminution in the value of investments.

Inventories:

Inventories are valued at lower of cost or net realizable value. Cost of Raw

Materials is computed by using “Specific Identification” method and for other

inventories “Weighted Average” method. The cost includes costs of purchase, cost of

conversion and other costs incurred in bringing the inventories to their present location

and condition.

Sales:

Sales are recognized as and when risks and rewards of ownership are passed on

to the buyer and ultimate realization of price is reasonably certain. Export Sales are

inclusive of deemed exports while local sales are net of Sales Tax/ VAT.

Borrowing Cost:

Borrowing Costs attributable to acquisition and construction of qualifying assets

are capitalized as a part of the cost of such asset up to the date when such asset is ready

for its intended use. Other borrowing costs are charged to Profit & Loss Account.

Employee Benefit:

Short “Term employee benefits including accrued liability for Leave Encashment

(other than termination benefits) which are payable within 12 months after the end of

the period in which the employee render service are paid/provided during the year as per

the Rules of the Company.

Foreign Currency Transactions:

Transactions in foreign currency are recorded at the rate of exchange in force at

the date of transactions. Foreign currency assets and liabilities are stated at the rate of

exchange prevailing at the year-end and resultant gains/losses are recognized in the

profit and loss account. Premium in respect of forward foreign exchange contracts is

recognized over the life of the contracts. In accordance, with the AS – 11 (Revised

2003) the Exchange difference arising on the contracts/transactions entered into on or

after 01-04-2004 on the settlement of monetary items or on reporting monetary items at

rates different from those at which they were initially recorded during the period, or

Page| 72

reported in previous financial statements, is recognized as income or expenses in the

period in which they arise.

Taxation:

Income Tax expense comprises Current tax and Fringe benefit tax (i.e. amount of

tax for the period determined in accordance with the Income Tax Law) and deferred tax

charge or credit (reflecting the tax effects of timing differences between accounting

income and taxable income for the year). Deferred tax charge or credit and the

corresponding deferred tax liabilities or assets are recognized using the tax rates that

have been enacted or substantively enacted by the balance sheet date income for the

year). Deferred tax charge or credit and the corresponding deferred tax liabilities or

assets are recognized using the tax rates that have been enacted or substantively enacted

by the balance sheet date. Deferred tax assets are recognized only to the extent that there

is reasonable certainty that the assets can be realized in future; however where there is

unabsorbed depreciation or carry forward loss under Taxation laws, deferred tax assets

are recognized only if there is a virtual certainty of realization of such assets. Deferred

tax assets are reviewed at each balance sheet date and written down or written up to

reflect the amount that is reasonably I virtually certain as the case may be to be realized.

Tax credit is recognized in respect of Minimum Alternative Tax (MAT) as per the

provisions of section IISJAA of the Income Tax Act, 1961 based on evidence that the

company will pay normal income tax within the statutory time frame and is reviewed at

each balance sheet date.

Costing and Pricing:

As GTN Textiles Limited is a manufacturing concern and involves a large

number of processes, Process Costing method is followed. It helps the Company to

ascertain the cost of a product at each stage of production, i.e. cost at each process

through which the row cotton passes through for the production of fine yarn. The total

cost incurred at the each stage of production is carried out to ascertain the final cost.

The pricing method adopted by the GTN Textiles is Cost-plus-pricing and hence a

certain percentage of the profit is added to the final cost incurred.

Budget and Budgetary Control:

Budgets are prepared by this department on a quarterly basis and based on this

the annual budgets are prepared. The budgets can be sales budget, production budget,

Page| 73

expenses budget and the total budget. At the month end, a comparison is made between

budgets and actual right from the raw cotton procurement till the last process. The

reasons for variations (if any) will be found out.

Organization Structure- Finance Department

(Figure 4.9)

Group Technical Advisor

Senior Officers

Operators

AGM Finance & Accounts

Deputy Mgr. Finance & Accounts

Asst Mgr Finance & Accounts

Account Assistant

Page| 74

4.4.8 Human Resource Department

Introduction

Personnel Department plays a crucial role in the management of the company.

The department try to create and utilize an able and motivated workforce to accomplish

the organizational goal, and try to satisfy individual and group needs by providing

adequate and equitable wages and incentives, employee, benefit and social security and

measures for challenging work prestige, recognition security, status etc.

The personal department is responsible for recruitment, selection, placement

training, performance appraisal, promotion and separation. This department is headed

by DGM (industrial relations). He is in charge of implementation systematic recruitment

procedures for providing facilities for the overall development and motivation of all the

employees. He is also in charge of ensuring safety aspect in the mill and maintaining

cordials industrial relation with the workers. The categories of workers employed in

GTN are permanent and temporary. The recruitment, employment, leave disciplinary

actions, retirement etc are done as per the standing order. This department is also

responsible for training, performance appraisal compensation, and separation.

Work Shifts

The company works round the clock in three shifts.

1st shift : 8 am – 4 pm

2nd shift : 4 pm – 12 pm

3rd shift : 12 pm – 8 am

Staff shift : 9 am – 5.30 pm

Employees : 721

Staff : 109

For each shift, there would be 3 supervisors: 1 shift in charge and supervisors.

Functions of Personnel Department

Recruitment and Selection

Induction training procedure

Training

Evaluation

Performance appraisal

Wage and Salary Administration

Page| 75

Procedure

Recruitment and Selection

GTN textile Ltd recruits its manpower resources through recruitment agencies and

advertisement in leading newspapers .the other sources are from reference service

and relatives of employees and from apprentices. Recruitment is done b the G.M of

personnel and Industrial Relation department. At GTN textile selection is done

through tests and interview.

Induction Training Procedure

Technical and non technical fresh recruits are given general exposure to the overall

activities of the organization during initial days. There after they are given in depth

training in assigned areas of work followed by on the job training

Work men fresh recruits are given general exposure to the overall activities of the

organization. They are given on the job training under the supervision of the

jobber/mastery, guided by supervisors or deputy Manager (training).

(Figure 4.10)

Training

Training is given to all workers for developing their skills and proficiency in work.

The probationary period for all workers and office staff is six months. A formal

induction-training program is provided for fresh recruits as per the program given in

the induction-training manual. Also training is given to each worker when a new

machine is installed respective to their department.

Induction Programme

Induction Report

Training

On the Job Off the Job

Page| 76

Evaluation

On completion of training an evaluation regarding effectiveness of training received

is sought from the department concerned”

Performance Appraisal

Performance appraisal is systematic evaluation of the capacity for development. It is

usually done by the supervisors at GTN. Check list method is used for personnel

evaluation .it helps the superior or the manger to judge the honesty, sincerity, loyalty

and responsibility of the employees. It is usually done in the duration of six months.

The performance of each of the workers, their strengths, merits, weakness etc is

discussed in detail with them and these are considered for their promotion. However

at the managerial level, the through maintains the performance appraisal system, does

not discuss with the officers. It is not carried out in a transparent manner.

Wage and Salary Administration

GTN follows time rate wage system. For this purpose the attendance records are

maintained strictly also there is card punching system for recording entry and exit of

the employees and workers. The remuneration for the work of service rented by the

employees is paid in the form of salaries, wages or fringe benefit. Wages include

both monetary benefits and non monitory benefits. The employees pay/wage

includes basic pay, DT, TA, HRA, LTC, PF and ESI for 26 days. A certain

percentage of the annual earning is distributed as bonus/ of the total pay 12 % is for

PF and 1.75 % is for ESI. Over time work is also paid at the rate of 1.75 times that of

a normal day’s pay. There is no PF and ESI for over time and holiday work.

Employee Welfare Schemes

The company provides all the statutory welfare measures as per the Factory’s act

1948. There are general measures and the company also administers activities that come

under non-statutory items.

Employee Co-operative Society

There is an employee co-operative consumer stores to cater the requirements of

provisions, stationary and textile articles. They also arrange for supply of household

appliances like TV, Two wheelers, Sewing machines etc on installment basis.

Page| 77

Employee Credit Society

GTN Textile Employees credit society advanced loans to the employees ranging

from Rs. 2000/- to Rs. 25000/- for various purposes on a reduced rate of interest.

They also run recurring deposit schemes for the employees.

Silver Jubilee Educational Assistance

Under the silver jubilee educational assistance scheme, employees can avail benefits

up to 2 children towards their educational expenses .It ranges from Rs.600/- up to

VIII Std. Students, Rs. 2500/- to medical/engineering students per year.

Marriage Assistance

Interest free loans of Rs. 10000/ - are being given to the employees in the event of

marriage of their daughter.

Insurance Linked Gratuity Scheme

The company has adopted insurance linked gratuity scheme for the benefit of the

employees. Under the scheme, in case of death of an employee, his dependents will

be eligible to receive full gratuity for the total calculated period of service including

the balance of years of service after death.

Holidays

Each employee can avail 13 paid holidays in a calendar year. List of holidays will be

notified each year.

Canteen

A subsidized canteen managed by the employee representatives is taken care of

catering needs of the employees. Meals, Snacks, Coffee/ Tea etc. are available in the

canteen during the prescribed timings.

Quality Circle

Quality circle activities are being organized in Aluva Unit with the effective

participation of the employees.

Safety

Safety, housekeeping activities are arrived out on a continuous basis. A part from the

statutory compliance; a safety committee is effectively working.

Page| 78

GTN Textiles Employee Welfare Fund

There is fund constituted for the welfare of the employees. There are different

benefits like death benefit, retirement benefit, disablement benefit, loans assistance,

etc. contemplated under the scheme.

Assistance for the Handicapped Children

There is a scheme to assist the handicapped children of employees; this includes

supply of artificial limbs, aids or any other assistance to such cases.

Blood Donor Group

Blood Group of almost all employees has been ascertained. In case of emergency,

employees will come forward to donate blood.

Suggestion Scheme

The company conducts suggestion scheme in the areas of productivity,

housekeeping, quality, safety, etc. Employees who submit feasible suggestions are

being properly rewarded

Attendance Award

To recognize the employees to attend word regularly special prices are being given

every year.

Membership in Professional Bodies

The Company has membership in various professional bodies viz. SIMA, ATIRA,

SASMIRA, SITRA, Kerala state Productivity Council, etc.

Subscription to News Paper and Journals

Various News Papers and Journals are being subscribed for the benefit of Employees.

Anti Addiction Program

The company provides all assistance to employees who wish to come out from their

addiction habit.

Worker Education through Worker

In association with central board of workers education, employees are given classes

in batches for a period of 2-3 months on various subjects. There are trained worker

teacher who take such classes.

Page| 79

Standing Orders

There is’ an approved Standing order, which regulates the conditions of employment.

Excursion Tours

Excursion tours are arranged regularly for the Staff Members and for the

participation the workers education classes.

Twenty Years Service Award

As a token of appreciation for the continuous service put in, the employees are given

memento after completion of 20 years of service.

Family Planning Program

Encouragement like special level of finance incentive is given to employees in the

field of family planning activities.

Conveyance Facility

Subsidized conveyance facility is provided between Alwaye and factory for the

second and third shifts.

Social Activities

The company take care of the need of the local people with due consideration. This

includes construction of buildings, waiting shed, donation to various charitable

organization etc. Steps are taken for pollution control

First Aid Facilities

The company has direct touch towards he nearby hospital the company can use the

service of the hospital, in case of emergence.

Welfare office

Welfare activities are under the supervision of the welfare officer MR. Wilson Joseph

appointed by the company.

Health and safety

There is a safety committee for looking after the safety of the workers drinking water

facilities are priced at different spots inside the company.

Page| 80

Employee state insurance scheme

ESI scheme is unique multidimensional self financing social security scheme in

which every contributor is a benefactor and beneficiary. This integrated scheme of

health insurance prides comprehensive medical cover and cash benefit in

contingencies of sickness, maternity, disablement and death.

Trade Unions

There are four registered and one unregistered union in the organization

INTUC (Alwaye Textiles Employee Association)

AITUC (Alwaye Textiles Workers Union)

CITU (Alwaye Mekhala District Textiles Labour Union)

BMS (Bharathiya Masdoor Sangam)

The unregistered union is GTN Workers (Jobbers) Association

Organization Structure- Personnel Department

(Figure 4.11)

Group Technical

Advisor

Sr. GM Personnel & IR

Time Keeper

Head Security

Guards

Operators

Asst. Mgr

Security &

Welfare

Jr. Officer

Time Office

Sr. Officer

Time Office

Operators

Manager Personnel Senior Manager

Training

Security

Guards

Page| 81

4.4.9 Export And Marketing Department

Introduction

Export Department is serving as a link between the customers. The main duties of

the department includes sales enquiry conformation, sales contract, preparation of work

order which in turn aids the preparation of production plan sending samples and finally

shipment. Thus the export department does not have separate marketing department.

Once the lot is ready the production department makes arrangements for lot dispatch.

The goods are shipped in containers, which undergo house stuffing or port stuffing; the

cartons are covered with Hessian Cloth and loaded in to trucks by experienced

personnel under the supervision of the factory trained expert more over the truck is

covered with water proof tarpaulins to protect the cartons while transportation. The

containers used for transportation is of international standards, which are leased and

provided to shipping line.

The customer of the company include consumer who are directly use the product

for further processing and trader who sell it to other customers. The company promotion

efforts include MD’s visit to foreign countries and participation in Textile exhibition

abroad. Their major customers are Italy, Japan, China, Australia, Spain and UK etc.

The payments of almost all the transactions are through the letter of credit

system. The export department office is at Cochin where the transaction re carried out.

The information regarding the transaction are shared and passed to the organization

through routers. The main server of the company is at Cochin.

India continues to be dominant supplier of cotton yarn in the world.

However, Pakistanis closely following India and it may outpace India because of its

advantageous factors like favorable exchange rate, cheaper power tariff and lower

wages. Of late, Pakistan has started importing extra long staple cottons for manufacture

of finer counts of yarn for exports. Therefore, India will have to become more cost-

effective to withstand Pakistani competition in this segment. China’s imports of cotton

yarn are raising Cotton. India is now poised to become a prominent exporter of raw

cotton and cotton Yarn.

Export Procedure

The export transaction of GTN textiles ltd starts with the receipt of an intent or

order from the foreign importer. After obtaining the license and complying with the

exchange regulations, they proceed to assemble the product as per the terms of the

Page| 82

indent. Once the lot is ready, the production department makes necessary arrangement

for lot dispatch and arrange the secure shipping space on convenient terms and obtain

shipping order after complying with the customer formalities, i, e. paying customs duty

and obtaining customs export pass the company goes for bill of lading certificate of

origin and insurance policy.

Finally, they prepare invoice showing the price, quantity and description of the

product and negotiates with the bank with necessary documents for securing payment

under letter of credit agreement. The procedure is:

Export Procedure Chart

(Figure 4.12)

The GTN textiles ltd has a well established and managed export department

under the control of well qualified professionals. Its strict delivery schedules, consistent

quality and after sales service had given the company an important position in the textile

export area. Even though there is no separate marketing department for the company the

marketing, activities of the company are well performed by the export department.

Receipt of Indent/Order

Production, Packing &

Forwarding of Goods

Secure Shipping Order

Customer Formalities

Obtain B/L, Certificate of

Origin & Insurance

Negotiates with Bank for

Payment– L/C

Page| 83

Marketing

GTN Textiles Limited continues to maintain its leadership in exports of fine and

superfine-combed cotton compact yarns. It has export to over 25 countries across the

world selling high value and high quality products to the niche market. With a

substantially large export market and a growing domestic presence, GTN certainly has

its quality control measures and production standards in place. Not surprisingly the

company has been the recipient of Texprocil Gold award excellence in exporting for 18

years.

The company has been constantly focusing its efforts to carter to high priced end

users in sophisticated markets. Apart from predominant exports of cotton yarn to Japan

and Italy’s company’s yarn has also been well received in other countries viz. South

Korea, china Hong Kong, USA, Austria, Belgium, Israel, Australia, Taiwan, Malaysia,

Mauritius among others. The company enjoys excellent relations with all its overseas

customers, which have been assiduously built over the years by strictly adhering to

delivery schedules, maintaining consistent quality and providing prompt after sales

service. For the past few years, the company has been aggressively marketing its

products to high end users in the domestic market who have set up downstream projects

for export of high value fabrics, made-ups and garments.

The tie up with Japan has not only helped in penetrating the Japanese market, but

also in other parts of the world where ITOCHU, the marketing conglomerate has

officers. The connection has helped the company is sewing up business opportunities.

Supplier to Higher and Market:

Used for – shirting, stretch fabrics, voiles, velvets, velour, fine bed liner, fashion

knitwear, lingerie

Worldwide customer list – mark & Spencer, gap, Benetton, Victoria’s, secret,

Ann-Taylor

The payment of almost all the transaction is through the letter of credit system.

The export department office at Cochin, where the transactions are shared and passed to

the organization through routers. The main server of company is at Cochin.

Page| 84

Major Markets

Sl. No.

Markets

% share

1

Japan

36

2

Italy

15

3

Korea

12

4

Israel

10

5

China

6

6

Hong Kong

1

7

Taiwan

1

8

Malaysia

4

9

UK

1

10

Portugal

2

11

Germany

1

12

Austria

2

13

Australia

2

14

Mauritius

1

15

Chile

2

16

SriLanka

5

(Table 4.2)

Page| 85

Organization Structure- Export Department

(Figure 4.13)

General Manager

(Export)

Manager (Export)

Deputy Manager

(Export)

Assistant Manager

(Export)

Officers

Page| 86

4.5 Growth Profile

1962- GTN Textiles Ltd. was incorporated for the manufacturing of Cotton Yarn

1966- The company was taken over by the promoters, the Patodia Family of

GTN Group.

1983- The company Ltd. had established a unit at Chitkul Village, Medak

District in Andhra Pradesh.

1993- On 9th march 1993 company had allotted 18 lakh equity shares of Rs 10

each.

1994- The company had promoted Patspin India Limited, a 100% EOU as a joint

venture along with an equity participation of ITOCHU Corporation, Japan and

KSIDC, Trivandrum.

1995- The company had acquired Cotton Spinning Unit in Nagpur, Maharashtra

during 1994-95 by virtue of amalgamation of Perfect Spinners Limited with the

company.

1997- It further set up a yarn dyeing and mercerizing unit at Shadnagar, Andhra

Pradesh.

2004- The company was ranked 63rd in the BB 100 Gross Forex listing.

-The company ranked 327th in Industry 2.0's second annual listing of top 500

manufacturing companies in India.

-The company had received a composite score of 12 out of a possible 15 in

Industry 2.0's SCM Metrics study.

2005- GTN Industries Limited was incorporated as a public limited company on

28th March, 2005 under the Companies Act, 1956.

-It obtained the certificate for commencement of business on 6th

April, 2005.

Page| 87

-GTN Industries Limited had changed its name to GTN Textiles Limited and

vice versa through the fresh certificate of incorporation 27th

December 2005,

issued by the Registrar of Companies, Kerala.

2007- On 26th July 2007, company had authorized the board to borrow money

for and on behalf of the company in any manner from time to time and without

prejudice.

4.6 Future Plans

Reduce cost of production.

Sell improved quality, cost efficient products.

Focus more on export of cost efficient cotton yarns and less on promotional

activities.

Upgrading the present quality of products to international quality standards.

Page| 88

4.7 SWOT Analysis

Strength

Easy availability of cotton

Lower labour cost compared to developed countries

Well educated supervisory staff

Well educated technical & managerial skills

Excellent relationship with customer in India and abroad over the last

Experienced and committed personnel

State of the art quality assurance department

Foreign collaboration

ISO 9001 & 14001 certification

Highly skilled workers

Latest technology

Modern and automatic machines

Established product

Established market

Decades of experience in trading cotton yarn before venturing into this line of

activity

Strong finance

Goodwill of the company in the market

Uninterrupted supply of raw materials

Weakness

Many machines have become obsolete

The operating expenses are on the higher side.

High cost of power

No full utilisation of installed capacity

Poor infrastructure resulting in higher transaction cost

Raw material prices are increasing

Page| 89

Opportunities

India bring largest cotton cultivation has a great scope in textile market.

Globalization increased export opportunity for textile.

Increased demand of cotton garments in India and abroad.

Forward as well as backward integration.

Availability of cheap labour.

Threats

Growing competition from foreign brands.

Rising prices of raw materials.

Government policies and regulations.

Climate variations affect the cotton cultivation.

Page| 90

Bibliography

Prasad, L.M: Principles and Practices of Management: Sultan Chand &

Sons, 2007

Annual Reports of GTN Textiles Limited

Websites

http://www.gtntextiles.com/homepage.html

http://www.moneycontrol.com/company-

facts/gtntextiles/history/GTN02#GTN02

http://www.india-crafts.com/textile/india-textile.html

http://www.dnb.co.in/SMEstextile/overview.asp

http://spg.umich.edu/about/authority-and-delegations

http://www.managementstudyguide.com/delegation_of_authority.htm

http://www.managementstudyguide.com/centralization_decentralization.h

tm

http://www.allsubjects4you.com/Management-departmenation.htm

http://www.openlearningworld.com/books/Organisation/Organizations/Ty

pes%20of%20Departmentation.html

http://www.moneycontrol.com/annual-report/gtntextiles/directors-

report/GTN02#GTN02

http://www.bseindia.com/BSEdata/ipo_downloads/Info_memo_GTN.pdf

http://www.kkhsou.in/main/EVidya2/commerce/departmentation.html