The textile units in Punjab are in a dilemma over whether to increase prices of cotton fabric or not as the rise in the price of cotton has started affecting their profit margins.
However, many industrialists have been able to hold the price line without any further revision in prices as of now. They had booked the orders earlier when cotton prices had not escalated. The textile owners maintain that the fresh orders being booked are at higher costs and this would automatically result in the revision of the prices of cotton fabric.
"If the trend continues it would possibly result in the closure of small- and medium-sized industries in Punjab and would erode the capital of bigger units," said Ajit Lakra from Superficial Knitwear.
Lakra attributes the reason behind cotton prices pushing up in domestic market to the unbridled export of cotton.
"With the government not checking the export of cotton, international firms have started purchasing raw cotton from domestic market and are supplying them to countries who offer them better dividends. The woes of textile industry remains that not only cotton prices but other raw material prices have also pushed up in the recent past," adds Lakra.
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With the increase in input costs, the Indian textile industry has been rendered uncompetitive in the international market, while the domestic market continues to grapple with inflation woes.
"Not only the cotton prices but prices of other material used by the textile industry that includes acrylic yarn, pure wool, mixed wool, blended wool , has already gone up by around 10-30 per cent," says Shyam Bansal, MD, Rage Unit.
Nahar Group Managing Director, Kamal Oswal, while talking to Business Standard, laments that with cotton prices surging in the past few months, it has come as big blow to the textile industry in Punjab.
The inflation has forced people to rationalise their budgets who prefer to spend less on apparel needs, the impact of which are sales of apparels that has depreciated by around 15 per cent. With the depreciation in apparel sales, the textile units are unable to push the prices up as a result of which they have been incurring heavy losses.
According to U K Sharda, former assistant director (Textile) and a textile consultant now, "The rise in the input prices would naturally result in the hike in prices of cotton fabric products."
He, however, adds the hike in products that gradually would be passed on to the consumer when the textile units find it hard to absorb the hike in input costs.
Kuvam International Fashions Ltd Managing Director Sanjeev Gupta adds that appreciation in cotton prices as well as inflation has virtually negated the effect of profits earned by the textile units from dollar appreciation.
According to Confederation of Indian Textile Industry (CITI) members, with prices of cotton going up in the domestic market, the government in order to protect the texti1e industry from further loss should ease the restrictions for import of cotton and also try to ban its export so that the cotton prices in the domestic market get stabilised.