With cotton yarn prices declining steeply than raw cotton, around 3,700 spinning mills in the country have decided to bring down production by 32 per cent from today.
“Yarn prices have come down drastically and as a result around 500 million kg of stock has piled up in the mills, compared with 100-150 million normally,” said J Thulasidharan, chairman, South India Mills Association. These mills employ around 1.2 million people. Of this 50 per cent of the workforce is in Tamil Nadu, which has 2,200 mills.
The state also accounts for half of the total piled up stock. Tirupur used to buy 50 million kg yarn but has now stopped since most of the units have closed following the Madras High Court’s order on a pollution petition.
This resulted in cotton yarn price declining to Rs 215-220 from Rs 285 a kg some 45 days ago. The mills, which had gone on a one-day strike on Monday, stated that the estimated loss due to the strike was Rs 270 crore.
“Such a drastic step is needed to ensure a reasonable price and boost the sagging demand for cotton yarn. It has also been decided that a review meeting of the stakeholders will be called in first week of June to take stock of the price and demand and to chalk out further action,” he said
The present predicament is due to a combination of factors. He said the government abruptly imposed a restriction on export of cotton yarn to 720 million kg for the year 2010-11 based on a complaint made by cotton yarn users alleging high prices and low availability. Consequently, there was no export from January 15 to March 31, 2011. This led to a huge unsold stock.
Post withdrawal of restrictions from April 1, 2011, exports have been tardy since non-shipment of cotton yarn for over two months had diverted several importers to other sources. Moreover, mills had off loaded the stock at a reduced price internationally. “Our understanding is that exports during the last five weeks have amounted to less than 50 million kg as against 70-75 million kg per month last year before the restriction,” he said.
