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India’s Arvind Limited is gradually cutting down its garment production capacity in Ethiopia with uncertainty looming over renewal of the US African Growth and Opportunity Act (AGOA). The company, however, has earmarked ₹200 crore for capacity augmentation in its advanced material division and garmenting businesses, and cost optimisation projects for fabric business during fiscal 2022-23.
“During the year we completed a restructuring of some of our facilities across India and also started to gradually bring down capacity in Ethiopia. We had shared that the AGOA Treaty has been kind of cancelled for now and hence duty-free exports from Ethiopia to the US have been halted. As such, the traffic for that location has come down, so we have started kind of reducing the footprint there. So, our installed capacity has come down to about 50 million pieces or so,” Samir Agrawal, chief strategy officer at Arvind, told analysts in a post-earnings call recently.
Enacted in 2000, the AGOA offers sub-Saharan African countries duty-free access to the United States. It was renewed in 2015 till 2025, but faces uncertainty over its extension further.
The key challenge in this segment has been the continuously rising prices of all the raw materials, most prominently cotton, which continued to climb even though the new harvest coming in the market around November, he informed.
