Indian textile companies are mulling over a strategic shift of production base to Uzbekistan and Kazakhstan on account of problems like high power tariffs, labour law inflexibilities and infrastructure limitations.

This move could enhance country’s cost competitiveness in world’s export markets. Both countries offer cotton at discount of 15-20 percent against local prices.

Uzbekistan previously revealed plans for luring about $300 million investment from Indian textile firms within 2010. Uzbek Government has promised 15 percent concession on purchase of cotton for spinning, while 20 percent is offered on cotton procurement for apparel units.

Kazakh Government is inviting investments into Ontustik SEZ, which offers various tax exemptions to textile enterprises on condition that they manufacture products from 100 percent cotton, of which at least 30 percent must be Kazakh cotton.

Indian textile companies are thinking over investing in both major cotton producing nations because they have proposed advantages such as low cotton prices, less expensive power supply, rich infrastructure and ten year tax holidays. Further, big EU markets are closer to these nations.

One of the initial forayers into Uzbek market is Spentex Industries Ltd. Sources informed that Vardhaman Group will acquire an Uzbek firm for expanding operations in its textile industry.