Rising raw material prices, lack of enough government support and declining demand in the United States have taken a toll on the Indian textile industry.
Thirty-three major textile companies have reported a cumulative loss of Rs 152.21 crore in the first quarter (April-June) of the current financial year, compared with a profit of Rs 144.56 crore in the corresponding period of the previous financial year.
Major textile companies like Raymond and RSWM Ltd have reported losses, whereas Vardhaman Textiles, Alok Industries, KPR Mill and Sutlej Textiles have witnessed a massive decline in their profits.
The industry’s performance was on the decline even last year on account of the dollar falling nearly 12 per cent against the rupee. The prices of different varieties of raw cotton rose nearly 40 per cent in 2008, with Shankar-6, the benchmark, selling at Rs 28,500 per candy (1 candy is 356 kg) in June, as against Rs 21,985 per candy in October 2007, a rise of nearly 30 per cent.
“Due to the recession in the US, the importers there are asking for discounts. In such a scenario, the domestic industry cannot pass the increased cost of raw materials to its customers,” said DK Nair, secretary general of the Confederation of Indian Textile Industry (CITI).
Total textile imports by the US during the January-June period have come down by 4 per cent to $32,996.84 million, as against $34,384.62 million in the same period last year.
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“The cost of raw materials has increased substantially. Around one-third of our raw cotton is exported and the domestic mills are left in the lurch. The cost of power has also gone up and the companies are forced to use their own generators as most states are not able to supply adequate electricity,” said Sunil Jain, president of the Northern India Textile Mills’ Association. After reports of textile mills laying off workers on account of losses due to high cotton prices, the government had last month decided to withdraw the 14 per cent import duty on cotton.
The government has also notified that all cotton exports have to be registered with the textile commissioner.
“The decision to withdraw the import duty on cotton came in July and the textile mills’ capacities during the first quarter of 2008 were underutilised on account of non-availability of raw cotton at competitive prices,” said Prem Malik, chairman, Texprocil.
The impact of the government’s decision may be seen in the coming months, though most of the cotton that was available in the market in this season has already been bought. Chances of the domestic companies getting a good deal are dim until the new crop hits the market, says Malik. However, the prices of cotton, according to analysts, are set to rise further due to low acreage and insufficient rainfall.
The condition of the blended yarn industry is no different as the government has not paid heed to the demand of the Indian Spinners’ Association (ISA) for reduction in excise duty on man-made fibres from 8 per cent to 4 per cent.
The prices of polyester staple fibre (PSF) rose 20 per cent in the domestic market during the first quarter of 2008-09. If the increase in the prices of PSF for March 2008 is included, the hike comes to to 31 per cent. “The heavy losses incurred by the blended yarn mills will continue and many small mills may even have to shut down if the government does not listen to the demands of the industry,” said VK Ladia, president, ISA.