"The increase in demand for the textile products has enabled the spinning mills to break even and and are showing signs of recovery. To maintain the momentum the government must expedite the Rs 35,000 crore debt restructuring package," said S Dinakaran, chairman, South India Mills' Association (SIMA).
In his address at 53rd Annual General Meeting of SIMA at Coimbatore on Monday, he said that power situation, lack of manpower, inconsistent cotton export policies announced by the government have resulted in volatility in cotton price, which resulted in over Rs 5,500 crore erosion in the working capital.
Last fiscal's slowdown in textile production was due to the high volatility due to the above factors, he said. “Majority of the textile mills in the country faced most difficult times in their history last fsical,” said Dinakaran.
On the raw material, he said, in the last five decades, the production of cotton increased from 30 lakh bales in 1950-51 to an all time record of 353 lakh bales in 2011-12.
The area under cotton during the same period increased from 58.82 lakh hectares to a record high of 121.78 lakh hectares. The productivity (yield per hectare) increased from 98 kgs in 1950-51 to 533 kgs in 2007-08.
Cotton Authority Board (CAB) has estimated the cotton production for the season 2011-12 at 353 lakh bales (170 kgs each), four% higher than the previous season and the mill consumption at 239 lakh bales, 3% lower than the cotton season 2010-11, the export at 127 lakh bales, 66% higher than 2010-11 leaving a closing stock of 28.5 lakh bales.
The area under cotton during the season 2011-12, reached a record high of 121.78 lakh hectares, eight% higher than the previous season.
However, during the season 2012-13, the area might be slightly lower than 2011-12 season. The mill consumption is expected to increase marginally due to improved market conditions, said Dinakaran.
Cotton prices registered the highest volatility in the history of Indian textile industry during the cotton season 2010-11 owing to global cotton shortage by around 10% and also the short sighted cotton export policies of the government.
The price of Shanker-6 which was at Rs 38,000 per candy of 355 kgs during October 2010 rose to Rs 61,800 at the end of March 2011 and fallen sharply to the level of about Rs 31,000 per candy at the end of July 30, 2011.
“This volatility resulted in over Rs 5,500 crore erosion in the working capital for the spinning sector,” said Dinakaran.
Thereafter, the cotton price registered gradual increase till September 2011 and it registered continuous fall and ruled at Rs 34,000 per candy at the end 2011-12.
The decline continued till the middle of June 2012 and thereafter the prices reached around Rs 39,000.
“…this again due to the inconsistent cotton export policies announced by the government during March and April 2012,” said Dinakaran.
He noted, around 130 lakh bales cotton was exported during the cotton season 2011-12 as against the CAB's original estimate of 84 lakh bales leaving a closing stock of around 28 lakh bales of substandard quality cotton for the domestic industry, the lowest stock level ever maintained in the recent past.
