Textile mills in a spot due to high cotton prices

Tag : Cotton Yarn

The cotton textile industry, which is reeling under losses due tovarious reasons, feels that the over 40 per cent increase in theMSP of cotton will be detrimental to their interests.
Manish Bagrodia, vice-president of the Northern India TextilesMills Association and director of Winsome Textiles, told BusinessStandard that the textile industry was in jeopardy due to risinginput costs in the form of captive power (high price of furnaceoil), withdrawal of interest subsidy of 2 per cent on exportcredit, decreased duty drawback rates for cotton knitted garmentsand volatility of the rupee against dollar.
According to Ashok Kapoor, general manager (raw material), NaharIndustrial Enterprises Ltd, cotton prices are normally revisedbetween 10 and 15 per cent annually but the revision this year hasbeen unprecedented. “The ginners will buy raw cotton at ahigher price and sell us at revised price but we will not be ableto pass it on to our buyers because the demand for yarn and garmentmanufacturers has been decreasing since last year.”
The millers are now contemplating production planning and newproduct mixes to maintain the volumes. If the volumes are reduced,it might result in layoffs, he added.
Most of the North Indian textile mills situated in Ludhiana,Chandigarh, Haryana, Himachal, Western Uttar Pradesh, Rajasthan andGujarat are battling higher costs of fuel and raw materials such ascotton and cotton yarn.
“Also, increased wages, shortage of skilled labour and aboveall the announcement of Union government to increase the MSP formedium staple cotton by almost 47 per cent as compared to last yearhas added to the misery,” said Sunil Jain , president, NorthIndia Textile Mills Association (NITMA).
The textile mills in Northern India exported textile products wortharound $3 billion during the year 2007-2008 , out of country'stotal export of $20.5 billion. This was almost 20 per cent short ofthe set target of $25 billion.
This year the situation is likely to further deteriorate as demandfrom the US, which is the largest importer of textile products fromIndia, is likely to further go down in the second half of 2008.
“The demand from US was down by 3.24 per cent in the firsthalf,” added Ashish Bagrodia.
Neeral Saluja, the managing director of Sel Manufacturing CompanyLtd said that the price of yarn should get an equal appreciation tosave the industry.
“As most of the North Indian textile mills have made lossesin the first quarter this year or have made substantially lowerprofits compared to earlier years in North India, the mills alreadyrunning into losses would be further reeling under the pressure ofincreasing input costs and raw material prices on one hand, andstagnating or declining price realisation for finished goods on theother” said Bagrodia.