The Indian textile industry is likely to face challenging times in the coming months with China effecting a change in its cotton policy, rising cost of production and net margins rarely crossing 4 per cent, say senior industry officials.

While concerns were expressed about the sustainability of the domestic textile sector, industry sources did not fail to point out that with China – the largest producer, consumer and exporter of cotton – changing its policy on sourcing cotton and yarn, the export of both – the white fibre and yarn to China from India could take a beating this year.

“Uncertainty might prevail till stability comes in Chinese cotton production and consumption pattern. Chinese Cotton Policy brought a sudden downfall in the New York price index and this in turn had a cascading effect on the entire world,” said Matt Earlam of Plexus Cotton.

Meanwhile, the Vice-President of the Northern India Textile Mills’ Association Sanjay K Jain said that cotton exports, which stood at 11 million bales (1 bale equals 356 kg) in the 2013-14 cotton season, could slide to 6-7 million bales in the 2014-15 season due to poor demand from China.

China is currently carrying high cost cotton inventory. It built huge stockpilr after buying the fibre at a reserve price of $1.34 a pound when prices in the global futures market were ruling at over $2. Saddled with high price stock, the country is now planning to reduce the inventory of cotton, besides cutting down yarn production, said Earlam.

Indian cotton prices also are not competitive, quoting higher than global market, he said

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