The Hindu Business Line : ‘High cotton prices hitting spinning mills’

The Southern India Mills Association (SIMA) has maintained that the bumper cotton crop realised this year has not helped the domestic spinning industry, which remained under recession right through 2007 due to rupee appreciation.

The Cotton Advisory Board early this month had estimated a whopping 310 lakh bales for the current season, pegging exports at around 65 lakh bales. Despite the higher cotton output, the textile mills are not in a position to buy cotton due to high prices and lower realisation of yarn prices. Cotton prices this month are 20 per cent higher than last year whereas, the yarn price is down by 10 per cent compared to January 2007.

While India’s textile export growth had declined from 12 per cent to 5 per cent in the last one year, China and Pakistan — relatively free of exchange volatility and high domestic interest rate — managed to increase their global shares.

The Tamil Nadu textile industry which accounts for 45per cent of the country's spinning capacity, has come under tremendous pressure due to high incidents of power breakdowns. None of the proactive measures initiated in recent times by the Centre has helped to turn the industry competitive, according to the SIMA Chairman, Dr K.V. Srinivasan. In order to revive the industry and to bring down the raw material price pressures, the SIMA chief has urged the Centre to expedite the announcement of fibre policy, as evolved at the Texsummit 2007 last year. He also called for reduction in the import duty on cotton from 10 per cent to 5 per cent, besides exempting it from the purview of per cent countervailing duty. Even as he was demanding the withdrawal of the one per cent duty drawback being given to the cotton exports, which actually suffers no duty incident, Dr Srinivasan also called upon the Cotton Corporation of India to hold two months' stock of quality cotton as buffer to enable the mills to procure cotton at a later stage. As for the finances, the SIMA chief wanted the Centre to give two years moratorium on loan repayment to the textile industry and a 4 per cent interest subvention on working capital loans for the textile and clothing industry, besides ensuring refund of all state levies on cotton textile exports. Among the other measures needed for the industry to tide over the current difficulties are a lower power tariff at Rs 3 per unit Kwh and exemption of cotton and cotton cone yarn from the value added tax and central sales tax levies, Dr Srinivasan added.