When the country is expecting a bumper cotton crop this year and farmers are confident about the revised minimum support price (MSP), the millers in north India find themselves in a difficult situation.
The cotton textile industry, which is reeling under losses due to various reasons, feels that the over 40 per cent increase in the MSP of cotton will be detrimental to their interests.
Manish Bagrodia, vice-president of the Northern India Textiles Mills Association and director of Winsome Textiles, told Business Standard that the textile industry was in jeopardy due to rising input costs in the form of captive power (high price of furnace oil), withdrawal of interest subsidy of 2 per cent on export credit, decreased duty drawback rates for cotton knitted garments and volatility of the rupee against dollar.
According to Ashok Kapoor, general manager (raw material), Nahar Industrial Enterprises Ltd, cotton prices are normally revised between 10 and 15 per cent annually but the revision this year has been unprecedented. “The ginners will buy raw cotton at a higher price and sell us at revised price but we will not be able to pass it on to our buyers because the demand for yarn and garment manufacturers has been decreasing since last year.”
The millers are now contemplating production planning and new product mixes to maintain the volumes. If the volumes are reduced, it might result in layoffs, he added.
Most of the North Indian textile mills situated in Ludhiana, Chandigarh, Haryana, Himachal, Western Uttar Pradesh, Rajasthan and Gujarat are battling higher costs of fuel and raw materials such as cotton and cotton yarn.
“Also, increased wages, shortage of skilled labour and above all the announcement of Union government to increase the MSP for medium staple cotton by almost 47 per cent as compared to last year has added to the misery,” said Sunil Jain , president, North India Textile Mills Association (NITMA).
The textile mills in Northern India exported textile products worth around $3 billion during the year 2007-2008 , out of country's total export of $20.5 billion. This was almost 20 per cent short of the set target of $25 billion.
This year the situation is likely to further deteriorate as demand from the US, which is the largest importer of textile products from India, is likely to further go down in the second half of 2008.
“The demand from US was down by 3.24 per cent in the first half,” added Ashish Bagrodia.
Neeral Saluja, the managing director of Sel Manufacturing Company Ltd said that the price of yarn should get an equal appreciation to save the industry.
“As most of the North Indian textile mills have made losses in the first quarter this year or have made substantially lower profits compared to earlier years in North India, the mills already running into losses would be further reeling under the pressure of increasing input costs and raw material prices on one hand, and stagnating or declining price realisation for finished goods on the other” said Bagrodia.
