Knitwear exporters have blamed yarn manufacturers of hoarding stock and using the present situation to their advantage.

Perturbed with the turn of event since the beginning of March, exporters in this knitwear hub said “yarn manufacturers have stopped delivery since March 5, albeit unofficially, with a view to hoard supply and create artificial demand. This is affecting our production schedule, particularly because the orders have started to flow in since January. There is also an abnormal increase in the rate of yarn and the mill sector is not prepared to come to the table for talks.”

Recapping the scenario, an exporter explained: “Cotton was ruling at Rs 38,500 a candy in October 2011. The 40s count yarn was then quoting Rs 211 a kg and the rate was maintained around that level up to February.

On March 1 this year, cotton prices fell from the October 2011 level to Rs 37,500 a candy. Yarn (40s count) on the other hand rose to Rs 235 a kg. There was a marginal increase in the price of the cotton on April 1 to Rs 38,800/candy, by which time, the yarn rate shot to Rs 248/kg.

If you compare the Oct 2011 cotton price with the April1 price, the increase is just Rs 300 a quintal. Yarn rate on the other hand has risen by Rs 36. This is an abnormal increase,” the source said and pointed out that the Government had allowed duty free import of cotton in the last six-seven months.

“The mill sector has imported nearly 21 lakh bales of cotton – duty free, at rates lower compared with the domestic rate,” allege exporters.

Unhealthy competition

Calling this an unhealthy competition and one that would hit – both the mill sector and the downstream garment sector hard, Tirupur Exporters’ Association President A. Sakthivel said that the association has sought the intervention of the Textile Ministry in this regard.

“We are unable to renegotiate the price with the buyer, as the contracts have been finalised. How can we manage when the yarn price shoots up from Rs 211 to Rs 248 and yarn deliveries stopped abruptly?’ he asked.

Stating that the sector was prepared for some increase, say up to Rs 225-227/kg of yarn, he said, “We can actually resolve this issue if only the mill sector is prepared to talk to us. The situation is affecting not just the knitwear exporters but the powerloom and made-up sectors as well,” he added.

The association, meanwhile, has appealed to the Textile Ministry to allow duty free import of yarn against export.

(This article was published on April 7, 2013)
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