Present level of prices may not soften for at least a couple of more quarters.
With no respite at all from the rising prices of yarn, both cotton and synthetic, mills are refusing to allow more than a day for fabric buyers to confirm orders.
Cotton prices have almost doubled in the past six months, while those of synthetic yarn have risen 30-40 per cent in that time. With the government allowing export of another 50 million kg of cotton yarn, the present level of prices aren’t expected to soften for at least a couple of more quarters.
“Due to constant fluctuation in raw material prices, we give our clients only 24 hours to confirm their orders. Earlier, clients could take their own time to do so,” said Manish Mandhana, joint managing director, Mandhana Industries.
Since demand is high, mills are trying to pass on as much of the cost burden as they can. Said Sunil Khandelwal, chief financial officer of Alok Industries: “We are passing on (all) the raw material price rise to the consumer.” Its retail subsidiary intends to pass on the entire 10 per cent excise duty on branded garments proposed in this budget to its consumers.
Added Arun Agarwal, director of Suryajyoti Spilling Mills: “We are passing on the whole cost to the consumer and not holding it back, as it will affect our margins.”
Arvind Mills is also planning to raise their rates by 10-15 per cent to pass on the input costs, said Sanjay S Lalbhai, chairman. He noted this was possible since demand for both fabric and garments were strong.
“At present, mills are in a position to pass on the whole increase in prices. It won’t remain so beyond a point,” said another mill owner.
Some mills have switched to synthetic yarn from cotton, as the former has risen less. Market preference has also shifted: Europe, in particular, has seen a drastic shift from cotton yarn to synthetics, which has also caused an increase in demand in synthetic textiles.
“It is easier to pass on the high raw material costs to exporters, but beyond a point, it is getting difficult to pass on the price hike to domestic consumers,” said Mandhana.
