Cotton prices boom, effects are seen in loom
Source: Fibre2fashion News Desk - India Date: 2008-07-07
Spinning mills across the country are reeling under the burgeoning pressure of rising rupee and unreasonably high prices of cotton which rose by 30 percent in the past few months thrusting the industry into a pitfall.
Cotton prices which started escalating since 2007 are taking a toll on the textile industry which consumed about 241 lakh bales of cotton last season, and is finding it difficult to meet its ends now. Prices of Shankar 6 variety in particular has risen from Rs18,000 per candy in 2007 to as much as Rs27,000 early this week.
While on the one hand the cost of production increased by 17 percent, on the other, yarn prices rose by a petty 2 percent. Moreover, demand for domestic yarn from Korea, Vietnam, Egypt, Mauritius and Bangladesh has also reduced considerably resulting in losses for mills and making it impossible for them to run operations for the entire week.
As a consequence, a good number of mills in Tamil Nadu had to cut down on production capacity while leading garment producers like Arvind Mills and Aarvee Denims have been under-utilizing their capacities for the last six months. Others like Ahmedabad based Gujarat Ambuja Exports Limited (GAEL) and Soma Textiles and Industries Limited have reduced their working days to mitigate losses.
In an exclusive interview with Fibre2fashion, Mr P G Makhija, Executive Director of GAEL said, “Non-availability of cotton at affordable rates have forced the company to reduce their working hours of its Himmatnagar cotton yarn unit to six days.”
When asked what they expected from the Government, Mr Makhija asserted, “Cotton exports must be banned and that Government should prevent hoarding of raw cotton to overcome crisis in the domestic cotton market.”
Southern India Mills Association (SIMA), which also reduced its labor hour by 10 to 15 percent, shared similar opinion and reiterated, “We have demanded from the Government immediate suspension of cotton exports till December 31 2008 and remove import duty of 10 percent and Special CVD of 4 percent on import of cotton with immediate effect. We also hope that the authorities would ensure at least 40 percent stock ratio for use and allow cotton export on a quarterly basis, channelising the same through CCI. Banning of futures trading in cotton to avoid speculation and removal of 1 percent incentive offered for export of cotton are some other proposals we have put forward. If the Government fails to take these measures immediately, the situation will worsen and the entire textile industry would come to a grinding halt very soon.”
Abhijit Gohil, President of Soma Textiles and Industries gave his view on the situation, stating, “We run all the departments six days in a week and wherever possible, work is being realigned to make it more cost competitive since the pressure of increased prices of finished goods is way too much. From time to time, the industry has made several presentations to the Government including quantitative restrictions on cotton exports as well as duty free import of cotton but the final verdict is yet to be given.”
