EDITORIAL ARTICLE

Selection of machinery combination for spinning millsby

Dr. H.R. SheikhProfessor, Textile Institute of Pakistan

A great deal of thought and careful consideration is devoted by the entrepreneurs intending to set up spinning mills in order to decide the size of the units and the machinery combinations. Selection of state-of-the-art machines for all sections of the spinning unit would obviously be an ideal solution! However, it is not practically possible for the majority of the entrepreneurs to opt for an ideal machinery combination and unit size. Some of the main factors which must be optimised to finalise the size of the unit and brands of machines to be included in the combination are discussed in the following paragraphs.

1. Size of spinning units

The spinning unit should be of an economic size. The annual output of the unit should be sufficient to make the operations feasible. During the eighties a spinning mill with an installed capacity of 13000/14000 spindles was considered to be an economic unit. From mid-eighties till early nineties the textile industry of Pakistan passed through a period of boom in the international market. However, as the boom petered out the economic size of the spinning unit also increased to an installed capacity of 17000/18000 spindles. Due to escalation in the prices of almost all inputs, the size of an economic unit is currently estimated at about 20,160 spindles. With 100% capacity utilisation, average count of 21's, the daily output of the unit would be approximately 38,220 LBS or 13.76 million LBS (360 working days) annually sufficient to make the unit feasible. Installation of an economic size unit is an essential pre-requisite for a spinning mill to be viable.

2. Predominant machinery combinations

Whereas the size of a spinning unit determines its output rate count-wise, the type of machine combination effects both the output and the product quality. Sponsors are required to negotiate and finalise a financial plan, based on the total project cost, which is divided into debt and equity components. The debt component includes amount of foreign exchange required for the import of machinery usually under suppliers credit. As the spinning units earned fabulous profits in the eighties, large numbers of entrepreneurs were attracted towards investments in the spinning sector.

During early ninetees commercial banks and DFIs evolved approved machinery combinations and fixed ceilings of loans amount for each combination. Although these combinations were based on a blend of conventional and modern machines

yet the proportion of conventional low speed machines was on the higher side to limit the loan amount ceilings and thus cater for as large a number of entrepreneurs as possible. Some of these combinations which included LUWA air conditioning system, quality control and auxiliary equipment, accessories etc. with corresponding loan amounts are briefly reported for a spinning mill comprising of 17,280 spindles as under:

  Machinery Combination Loan Ceiling in foreign currency C & F KHI

Loan Amount (PAK Rs.)

      Early ninetees September, 2003

1 All Japanese plant Y1226,800,000 Rs. 183,526,826 Rs. 608,983,520

2 All Japanese plant except Y917,352,000 Rs. 137,234,024 Rs. 455,373,533

  Blow room (Trutzschler) and cards (Crosrol MK4)

DM 1,200.000

£ 648,000

Rs. 17,015,400

Rs. 27,246,910

Rs. 38,520,000

Rs. 59,222,664

    Total Rs. 181,496,334 Rs. 553,116,197

3 All Chinese Plant US$ 3,329,000 Rs. 72,940,720 Rs. 192,306,010

  Except drawing frame (Toyoda) and Auto-coner (Murata)

Y 399,600,000 Rs. 59,779,361 Rs. 198,361,440

    Total Rs. 132,720,081 Rs. 390,667,450

    Exchange rates:    

    US$ Rs. 21.9107 Rs. 57.7669

    £ Sterling Rs. 42.0477 Rs. 91.3930

    Japanese Yen Rs. 0.149598 Rs. 0.4964

    D.M. Rs. 14.1795 Rs. 32.10

It would be noted from the above estimates that the current C & F Karachi prices of a spinning unit (17280 spindles) have escalated by about 300% as compared to prices prevailing in 1990 mainly due to depreciation of Pak rupee.

As already pointed out fabulous profits earned by the spinning mills in the eighties attracted large number of entrepreneurs to the spinning sector. All of them wanted to set up a spinning mill as soon as possible, earn huge profits and thus join the ranks of billionaires. Most of these entrepreneurs were new to the spinning sector. Machinery combination selected by most of them is listed at No. 3 above. The main justification to opt for this combination was that it was cheaper as compared to the other combinations.

In some cases Crosrol MK4 or MK 4.5 cards were included in this combination in place of Chinese cards. Even with this modification the technological level of the units as a whole remained low due to low speed roving frames and ring spinning frames. Approximate number of such units, which came on stream between 1990/91 and 1995/96 was 226 with an installed capacity of 3.149 million spindles. Another serious draw back of these units was the inflated project cost, at which

these were set up by inclusion of kick backs. No wonder that 63 of these units were closed by 1996-97, i.e. within a few years of the start of production!

3. Product cost versus sale price

A crisis developed in the textile industry in the mid-nineties. Due to slump and recession in the international market, high interest rates, escalation in cotton prices, high cost of eletric power, stores and spares and multiplicity of taxes, the operations of the units with low speed conventional machinery combinations were no longer viable. The cost of products manufactured by these units exceeded the corresponding sale prices prevailing in the market. Consequently, these units incurred heavy financial losses, were unable to service the loans, became defaulters and ultimately closed down! By the end of 1998 APTMA reported closure of 91 out of a total of 440 spinning mills, i.,e. out of the total installed capacity of 8.7 million spindles about 2.0 million spindles were out of production! The predicament of the closed units highlights the necessity of selecting a machinery combination which facilitates the manufacture of yarn of the required quality at competitive price. Moreover, the anticipated product cost should be based on realistic considerations with adequate safety margin to absorb unforseen expenses such as rise in wages, escalation in the price of other inputs etc.

Like the product cost, the sale price should also be anticipated on realistic consideration, preferably on the basis of market profiles of developed countries such as U.S.A., E.U., Japan etc. which import textile products from developing countries such as Pakistan.

4. Open-end rotor spinning sector

The open-end rotor spinning sector of the textile industry of Pakistan is also a classic case which proves that spinning mills based on old, second hand machinery combinations cannot survive. Most of the installed capacity of rotors was built up by the import of second hand machines discarded by the European and American mills. The rotor spinning sector was, therefore, incompetitive from the start. The working capacity of open-end rotors has been declining steadily. Currently, out of an installed capacity of 146,000 rotors, almost 80,000 rotors are out of production. Thus, the working capacity is only about 45.21%.

In conclusion, it may be stated that both the ring spinning and the open-end rotor spinning sectors are in urgent need of balancing, modernisation, technological up-gradation as well as replacement of the old and obsolete machinery combinations whereever required by the state-of-the-art machines. This is the only way that these sectors can prepare themselves to face the challenges and exploit the opportunities of the WTO commencing with effect from 1.1 2005. Large textile groups and individual companies have started implementing rapid modernisation programmes in their textile units. TCO reports that an investment of US$ 4.0 billion has been

made in the last four years, However, the condition of the open-end rotor spinning sector has not changed at all which calls for immediate action by the concerned public sector agencies as well as owners of the units.

Acknowledgement

Useful technical information received from M/s. Haris Shakeel, Khalil Sajid, Muhammad Saqib Rahmatwala during the preparation of this paper is gratefully acknowledged.