Emphasising the crisis in the industry, the Confederation of Indian Textile Industry (Citi) has estimated a loss of Rs 11,000 crore for the cotton yarn sector due to measures like withdrawal of export incentives, restrictions on exports, and imposition of excise duty.
On behalf of the textile industry, Citi has sought urgent measures from the government to defuse the crisis being faced by it on account of various domestic and international circumstances.
“The textile industry is undergoing an unprecedented rough trajectory marked by crash in yarn prices, drastic demand erosion in the domestic and international markets, juxtaposed with withdrawal of export incentives that helped its price competitiveness, imposition of steep excise duty of 10 per cent on branded garments and imposition of quantitative restrictions on yarn exports,” said Shishir Jaipuria, chairman, Citi.
The textile industry body observed that the loss has eroded the working capital of the units significantly. “A majority of units are not able to meet their obligations for repayment of loans and interest. To avoid a large number of units becoming non-performing assets (NPAs) and, subsequently leading to closures in a matter of months, the government should announce a relief package without any further delay,” said Jaipuria.
Detailing the type of support the industry is expecting, Jaipuria said the Duty Entitlement Pass Book Scheme and drawback on exports of cotton yarn should be restored immediately, with effect from the dates of their discontinuance. has also sought restoration of interest subvention of 4.5 per cent on export of textiles and clothing. To stimulate dithering consumer demand, the industry also wants withdrawal of the 10 per cent excise duty imposed on branded garments and clothing in the recent Budget. As relief measures, the industry has been demanding moratorium of two more years on repayment of all loans and interest to be allowed including TUFS loans for all units in the textile and clothing industry, as well as reduction of margin money for purchase of cotton to 10 per cent.
According to S P Oswal, CMD, Vardhman Textiles, world cotton prices had crashed in line with global commodity prices in April, after reaching unprecedented high levels. “For instance, domestic cotton prices (Shankar-6) increased from Rs 30,000 a candy (356 kg) in September 2010 to Rs 63,000 a candy during February-March this year. It crashed to Rs 45,000 a candy in April and to Rs 38,000 a candy by the end of June. Since mills stock cotton for two-three months, most of them had bought cotton at high prices and are currently stuck with high cost cotton. They have lost over Rs 15,000 a candy on about 6.5 million bales (170 kg) in cotton stock, totalling to an estimated loss of Rs 6,000 crore,” said Oswal.
Moreover, coupled with drastic reduction in the prices of man-made fibres, which has incurred a loss of Rs 500 crore to the spinners, the industry losses are peaking to Rs 6,500 crore approximately, he added. Apparently, due to restrictions placed on export of cotton yarn last year, over 300 million kg of yarn remained with the mills as on March 31.
