The textile industry is facing a crisis over rising raw material prices and a decline in overseas orders in the last three months.
DK Nair, secretary general, Confederation of Indian Textile Industry (CITI), said the global economic slowdown which prompted buyers, especially in Europe and America, to postpone fresh orders and high volatility in raw material prices are a cause for concern.
Reacting to the global trend and excessive exports late last year, domestic cotton prices had increased from Rs 30,000 a candy (for Shankar-6) in September 2010 to Rs 63,000 earlier this year, before falling sharply to Rs 34,000 as demand from both global and domestic markets declined.
In a letter seeking immediate help from Prime Minister Manmohan Singh, CITI estimated a loss from cotton alone at Rs 6,000 crore. The calculations were based on the 65 lakh bales available with ginners who booked when the prices were high. Cotton exports from India has a 10% positive margin. Cotton in the domestic market is quoted at $2197.65 a tonne, against the global price of $2429.65.
A similar decline in the prices of man-made fibres accrued a loss of over Rs500 crore. Because of the restriction placed on export of cotton yarn last year, over 300 million kgs of cotton yarn remained with the mills at the end of FY11. Following a decline in domestic demand, stocks with mills have increased to 500 million kgs. Since prices have fallen at an average Rs90 per kg, the loss has been estimated at Rs 4,500 crore.
CITI’s overall estimated loss to the industry stands at Rs 11,000 crore in the last three months.
Starting with Greece, Ireland and Spain, the global economic crisis is gradually spreading to other European countries including Germany, France and the UK — major markets for Indian apparel products. “Fresh purchases of garments seem to have postponed for some months,” said Nair.
Units producing fabrics, made ups and garments have faced the effect of the volatility in the prices of fibres and yarns, in addition to a slowdown in demand for their products. There has also been a significant fall in demand in the domestic market following the imposition of 10% excise duty on garments and made ups.
“Let us see how the scenario emerges in the next 2-3 months when festive demand starts, said Amit Ruparel, chairman of the Cotton Textiles Export Promotion Council (Texprocil). Ruparel confirmed that Indian yarn exporters have faced intermittent cancellations of overseas orders.
Premal Udani, chairman of Apparel Export Promotion Council (AEPC), however, was confident that the problems faced by the raw material industry will not affect the apparel industry. “The raw material industry has been hit due to the slowdown in global demand. But, we will try our best so that it does not spread to the apparel industry which recorded a staggering 35% growth in April-May,” he added.
