Why India's Textile Industry Needs To Cut Its Fossil-fuel Dependence?

India’s textile sector experienced significant production curtailment and temporary shutdowns due to fuel supply disruptions and LPG shortages during the energy crisis caused by the US-Iran conflict. Combined with surging fossil fuel prices, it highlighted the sector's continued dependence on volatile fossil fuel supply chains. 

For one of India’s biggest employers and exporters, heavy reliance on fossil fuels not only exposes the textile sector to external energy shocks but also affects financial viability through rising energy costs and production disruptions.

Apart from LPG, furnace oil, diesel, and other petroleum-based fuels, textile manufacturing also depends on coal and biomass for meeting its energy demand.

Already battered by a series of external difficulties — disruption during the pandemic, stiff competition from Bangladesh, Vietnam, China, and tariff measures imposed by the United States, a major importer — the textile industry needs to reduce costs to remain competitive on the global stage. 

An analysis by Climate Risk Horizons found that if Tamil Nadu’s textile sector shifted completely to procuring electricity from renewable sources, there could be 35% reduction in energy expenditure. 

In other words, transitioning to clean energy not only provides a sustainability imperative but a financial one too. 

Hanging by A Thread

In Surat, Gujarat, one of India’s largest man-made fibre hubs, high crude-oil prices disrupted supply chains forcing textile mills to cut operations. Similar pressures were felt in Tamil Nadu’s Tiruppur, while 30% of Micro, Small and Medium Enterprises (MSMEs) in  neighbouring Coimbatore had to shut operations due to the LPG crisis. This impacted 2.5 lakh units and 4 lakh workers in textile and allied sectors. Migrant workers in Gujarat and Tamil Nadu were forced to return due to cooking gas shortages. Price surges impacted production significantly, even leading to reduction in export orders by 15%. 

The war also raised raw material costs 15%, according to the Tiruppur Exporters Association, while US and European buyers were reluctant to pick up garments under earlier contracts and were negotiating hard for lower prices.

Reducing the sector’s vulnerability to fossil fuel supply chain disruptions requires drastically reducing dependence on energy imports. This means enabling and incentivising more efficient production processes, shifting from gas or coal boilers to electric, and encouraging greater investment in renewable energy, batteries and other forms of energy storage.

Reduced Cost, Increased Savings 

It points to a substantial opportunity to lower fuel expenditure through renewable electrification and adoption of clean heat systems. Based on Annual Survey of Industries data, the report shows massive potential financial gains from renewable transition in Tamil Nadu, one of India’s top textile-producing states. 

Climate Risk Horizons’ report, Fashioning a Net Zero Future for Tamil Nadu’s Textile Sector, shows that shifting to 100% renewable electricity alone can generate annual savings of ₹2,320-3,250 crore, depending on renewable electricity prices. Under a renewable electricity price of ₹5.5 per kWh, Tamil Nadu’s textile and apparel sector can potentially save around Rs. 2,790 crore annually, resulting in 35% reduction in energy expenditure. 

In the future, as renewable energy prices decline, there could be even greater savings. Combining renewable electricity with clean electrified heat systems can offer potential savings of ₹1,560-2,770 crore, depending on current heating-system efficiencies. This translates into a 15-27% reduction in fuel expenditure. The added benefit is that renewable-powered heat systems can reduce wasteful fuel use while improving energy efficiency. 

With its track record of renewable energy adoption, Tamil Nadu’s mature textile clusters in Tiruppur, Coimbatore, Erode and Karur are well-positioned to capitalise on this opportunity. 

Gaining Competitive Edge 

For Indian manufacturers competing with producers in Bangladesh, Vietnam and China, rising energy costs translate into weaker margins and reduced pricing flexibility. Renewable electrification can help lower costs, strengthen economic resilience and support long-term manufacturing growth, aligning with India’s net-zero goal. 

This will help meet rising consumer preferences for sustainable products and reduce the carbon footprint in supply chains, which global supply chains are gravitating towards, making Indian textile exports competitive. Global trade is increasingly influenced by sustainability considerations with the emergence of policies like the European Union’s Carbon Border Adjustment Mechanism (CBAM), India’s trade agreements with the European Union and the United Kingdom. 

Although textiles are not currently covered under CBAM, their possible inclusion in future carbon-border measures is being discussed. Textile manufacturing, dyeing and finishing are energy-intensive processes, a major part of which relies on fossil fuels.As Europe is a major market for Indian textiles, this can become worrying for Indian industries if they cannot transition to cleaner fuels.

Phasing down dependence on fossil fuel, particularly imports, is critical to ensure stable and reliable production systems. The Ministry of Textiles has set the goal of a $300 billion textile industry by 2030. Achieving this will be much easier if the industry ensures cost-efficient, energy-efficient, and sustainable production systems.

Rakesh Ranjan is a researcher at Climate Risk Horizons. Views are Personal