The Hindu Business Line : Export orders bring colour back to spinning mills

Colour appears to be returning to the faded business fabric of the Indian spinning mills, as an easing of recessionary pressures are making Europeans and Americans return to garment stores to check out the latest offerings.

For the last two years, the 2,500-odd spinning mills of varying capacities across the country had been going through a rough patch because of several factors, such as rising raw material costs, availability of finances and sluggish demand growth.

More recently, the meltdown added to the industry’s woes, with even some of the best performing mills incurring losses and having to go for re-scheduling of loans by two years.

Order books full

“Orders have been picking up in the last two months and most of us are now full for the next three months. We have also started to realise better profitability in all major products, as demand in the European and US markets are picking up,” Mr R. K. Agarwal, Managing Director of Suryajyoti Spinning Mills and member of the Southern India Mills Association, told Business Line.

The domestic spinning mills industry has some 40 million spindles in operation, almost 50 per cent of which are located in Tamil Nadu, the rest being distributed in Gujarat, Maharashtra, Punjab and Andhra Pradesh.

The industry consumes about 240 lakh bales of cotton annually (one bale is about 170 kg) to produce various types of yarn for domestic and export textile markets.

Yarn prices firm up

As export markets are beginning to pick up, yarn prices have started to firm up. “There has been a 10 per cent increase in yarn prices, which are at present ruling at $3 a kg. With a little support from the Government, India can get back its second position in the global yarns market, which it recently lost to Bangladesh,” Mr Sushil Sancheti, Deputy Chairman of AP Spinning Mills Association, feels.

Cotton concern

However, even while the external business climate is improving, the industry has some concerns about domestic availability of raw material, cotton, this season.

The industry expects cotton production to be about 260 lakh bales, as against earlier projections of 290 lakh bales, due to adverse climatic conditions in some of the producing States.

Even this level of production could meet the local demand, but, industry players fear, increased exports could deprive the mills of the raw material, as multinational cotton traders may take advantage of the global cotton shortage and divert Indian cotton for exports.

Industry sources say that of the 18.5 lakh bales that arrived in the market so far this season, about 10.5 lakh bales had already been registered for export with the Textile Commissioner. This, they say, has created a shortage in the domestic market, despite the fact that there was a sizeable carry over stock of 72 lakh bales during the end of the last season. The shortage has also pushed up cotton prices to over Rs 2,000 per candy, despite the carry over stock.

The industry representatives are scheduled to meet the Union Minister for Textiles, Mr Dayanidhi Maran, seeking a temporary ban on cotton exports. “If production surpasses our projections of 260 lakh bales and we are left with a surplus by February 2010 end, the Government could revive exports, without harming domestic interests,” according to Mr Agarwal.

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