Reduction in purchasing power following global economic slowdown is likely to result in lower cotton consumption by domestic textile mills this year. As per the estimates provided by cotton traders in Gujarat, domestic textile mills’ cotton consumption in 2008-09 may range between 18.5 and 20 million bales.
Domestic mills had consumed around 22-24.1 million bales of cotton during 2007-08. However, the consumption is estimated to dip by around 3.5 -4 million bales in 2008-09.
“ Mills have purchased 11 million bales so far during the season”, said Arun Dalal, owner of Arunkumar and Co., an Ahmedabad-based leading cotton trading firm. Cotton prices have largely ruled firm this season in the wake of higher Minimum Support Price (MSP).
In addition to this, global economic slowdown has also taken its toll on the global as well as domestic textile industry. “The purchasing power of the mills has reduced substantially as the demand as well as exports of garments and textile products have been hit hard”, he added.
“Firm cotton prices have pressurised the margins of textile mills on the one hand, while slowdown has adversly impacted the demand globally”, Dalal added.
“Cotton consumption by domestic mills may be able to reach 20 million mark, which stood at 21.4 million last financial year”, said Kishor Shah, president, South Gujarat Cotton Dealers Association (SGCDA). According to him, in addition to economic turmoil and higher cotton prices, power cut in Tamil Nadu is also responsible for lesser cotton consumption in the country.
“Tamil Nadu consumes around 50 per cent of cotton in the country as the state houses hundreds of textile mills. Mills in Tamil Nadu are facing 60 per cent power cut, which has contributed to lower cotton consumption in the country”, he added.
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“Our daily consumption of cotton has dipped to 400 bales per day to 300 bales per day on account of 20 per cent reduction in production”, said Ashish Shah, MD, Aarvee Denims and Exports Ltd.
Data available with industry players suggest that around 19.6 million bales have already arrived in the market as on date, which were at 28.9 million same period last year. “Out of the total arrival, Cotton Corporation of India (CCI) has purchased 6.25 million bales. Of the total cotton purchase by CCI across the country, 5.1 million bales are unsold”, Arun Dalal said.