The Hindu Business Line : Falling yarn price brings respite to garment units

Coimbatore, Nov. 27 The subdued cotton yarn prices have given some respite for the garment producers who are still to come to grips with the hardened export market created by the depreciating dollar.

Knitwear manufacturing units which shied away from accepting new orders since July last due to unremunerative export prices arising out of a strong rupee against the dollar have started to see some activity in recent weeks, thanks to the easy price situation in the domestic yarn market.

The spinners warding off the fall in price realisation in their yarn exports have shifted of late to selling yarn in the domestic market, unmindful of a marginal fall in their prices for the local yarn sale.

The surplus yarns available in the domestic market has led to the spinners and processors offering a reduction in their rates. The garment producers are able to get some 8 to 10 per cent reduction in fabric costs and this has come to be of some help for them to restart their activity, according to Mr R. Gopal, Managing Director, Royal Classic group, from Tirupur.

Temporary relief

Mr Gopal feels that unlike the last six months when the knitwear industrial activity practically came to a standstill due to the rising rupee, now 20-30 per cent of units have become active, though the relief they find from the lower yarn prices is only a temporary phenomenon.

“We will not know what will happen after two-three months, if the yarn market will get stabilised or if the yarn prices will climb up on the basis of any flare-up in raw cotton prices beyond January,” said Mr Gopal.

However, KPR Mill, also from Tirupur, which earns 25 per cent of its income from garment exports, is of the view that the spinning or garment sector is currently undergoing a critical stage and much depended on how the raw cotton prices would behave over the next 1-2 months.

Looking ahead

Though right now the higher export enquiries for India’s raw cotton, due to the China factor, has boosted domestic cotton prices sentiment, the actual situation would be known by mid-December when China’s actual cotton imports would be known, according to Mr Natarajan, Managing Director, KPR Mill.

Mr Natarajan held the view that the textile sector needed Government support to tackle the present crisis. The three per cent hike in duty drawback for exports and the two per cent interest remission on export finance helped the industry but the subsequent rise in rupee value against dollar had dwarfed the Government’s relief package.

A higher drawback rate and some steps to offset the higher raw cotton prices were needed to put the industry back on rail, he said.

Fashion focus

Most knitwear exporters prefer to go for high fashion garment export orders as they fear that the current level of rise in rupee value had rendered their operations, especially in basic garments, uncompetitive vis-a-vis the exporters from Bangladesh which had not seen any currency upheavals against the dollar in basic garments.

“We do get export enquiries but we have to tighten our prices because our bank rates are quite high. Even the two per cent cut in export funding announced by the Government is not being passed on to the exporters by all banks,” said Mr K.A.S. Thierumurthy, Managing Director of Stallion Garments, Tirupur.

More Stories on : Textiles | Cotton | Readymade Garments

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