The Hindu Business Line : Low raw material prices may be boon for textiles

New Delhi, Nov. 9 Even as the textile industry has listed a litany of woes demanding relief measures to get over the double whammy of decline in demand and the looming menace of large-scale layoffs, the domestic industry might take due advantage of the distinct decline in raw material prices the world over such as cotton, polyester and viscose staple fibre to rev up a rebound in demand and keep the built capacities used effectively.

Highly-placed government sources told Business Line here that available figures from global markets show that cotton (Far Eastern) price has tumbled by 18.09 per cent in a year-on-year change on October 31, 2008. Polyester filament prices in China have dropped by 27 per cent to $1.13 a kilo in the last week of October 2008 as compared to the corresponding period of October 2007 and viscose spot prices in China in relation to cotton and polyester prices have fallen by close to 23 per cent to $2.28 a kilo in the third week of October, 2008 as compared to the corresponding period of October 2007.

They said that with rupee depreciation vis-À-vis the dollar the import option might not be profitable, it could help industry in procuring the requisite raw materials relatively cheaply, particularly when it is saddled with excess capacity built in the boom year of investments in the industry during the past few years.

The sources conceded that the share of textile imports by the US from India was 5.4 per cent, 5.6 per cent and 5.5 per cent respectively in 2005, 2006, 2007 and the trend is likely to turn bad this year with the US facing a recession and tepid demand.

This is also reflected in the growth rate of US textile imports from India which skidded from 26 per cent in 2005 to a mere 1.39 per cent in 2007 and the trend in the current year is none too encouraging. What is worrisome is that India’s export growth rate of textiles and clothing to Europe is also seriously slowing down.

Officials said that the Textile Ministry is persuading the Reserve Bank of India (RBI) to enhance the margin period of two months for cotton purchase to six months but the apex bank has indicated that this depends on the individual bank’s capacity and the client’s standing in clearing advances without default.

On the delay in the disbursal under the Technological Upgradation Fund Scheme (TUFs) to the industry, the sources said the scheme being demand-driven, it became popular in the wake of the dismantling of the quota regime in 2004 and a lot of indigenous textile industries went in for modernisation to get rid of their obsolete machinery. They said that Rs 1,200 crore would be required to clear the backlog of proposals under this scheme by March 2009.

The Textile Ministry is in talks with the Finance Ministry to get a tranche of Rs 300 crore released in a month’s time for funding the TUFs. It is also hopeful that the Finance Ministry is likely to provide more funds on the lines it did in 2007-08 to clear the backlog so that “break-even would be achieved by the next financial year”, the sources said.

When contacted, the Textiles Secretary, Mr. A.K. Singh, said that “the government has always endeavored to extend timely and appropriate support to the textile industry”. He said the Government is keen on setting up ‘Fashion Hubs’ to beef up the entire value chain and to provide an interface between the stakeholders by creating a permanent market place for the Indian fashion industry.

He said the proposed ‘fashion hubs’ would also serve as a single stop fashion business point, showcasing Indian fashion trends, craftsmanship and design legacy of India, besides entailing efforts to strengthen the entire supply chain including establishing backward linkages with suppliers. An announcement to the launch of such ‘fashion hubs’ is likely within a month, he added.