Garment exporters worry over costlier yarn

Bharani Vaitheesvaran Chennai | Updated on February 04, 2014


Recent hike by mills seen as roadblock to garment and knitwear exports revival

The Textiles Ministry expects exporters to achieve a target of $43 billion this fiscal. But, fundamental issues such as the rise in costs of raw cotton, freight charges, and labour puts it a little beyond reach.

The recent hike in cotton yarn prices by mills is a roadblock to the revival in garment and knitwear exports, said A. Sakthivel, President, Tirupur Exporters’ Association, in a letter sent on Monday to the Textiles Minister Kavuru Sambasiva Rao.

He protested the ₹ 10/kg increase mills have effected over the last 10 days, raising bottom-line concerns for clothing manufacturers at a time Indian textile units have just begun to benefit from European and American economic recovery.

Export target

“When we have been taking efforts to reach the export targets fixed by the Ministry of Textiles, the increase in yarn prices have come as a blow. It would be difficult to reach the set level in this year,” he said in the letter.

S. Sakthivel, Executive Secretary, TEA, told Business Line the Ministry has set a stiff export target against $34 billion achieved last fiscal. The spinning mills, he said, are a tad slow in reducing yarn prices after rates of raw cotton decline.

However, the mills, which supply cotton yarn for the manufacture of fabrics and garments, tell a different story: the input costs for these factories have increased by ₹30 a kg in the last six months. One of the chief contributors to this inflation is the increase in raw cotton prices despite a record output forecast of 375 lakh bales for 2013-14.

K. Selvaraju, Secretary-General, The Southern India Mills’ Association, says the on-the-ground output this year could fall short of that prediction by 15 lakh bales. On top of that, export of raw cotton is seeing swift registration despite tepid demand from China and other buying nations.

Over 65 lakh bales have been marked for export this season, and the total shipments may touch 90 lakh bales this year. Since consumption by Indian mills is pegged at 290 lakh bales, exports above 70 lakh bales will mean short supply for domestic mills, and as a result – price inflation. “Add to this the holding back of stock by farmers for want of a better price. This is obviously bound to create a pressure on prices.” The incremental hike in diesel prices and rising labour costs are not on the credit side for mills grappling with working capital issues.

Freight charges

Lorry freight charges have risen by ₹7,000 for a consignment of 100 bales (17,000 kg). Tamil Nadu, which produces about 70 per cent of the cotton yarn in the country, has a raw cotton production capacity of only 5 lakh bales.

To meet its targets, it transports, chiefly from Gujarat, about 115 lakh bales each year.

Around 2.09 bales make a candy of cotton. “With the price of good quality cotton from Gujarat ruling at Rs 46,000 a candy, how can yarn prices be kept down,” questions Selvaraju.

Published on February 04, 2014

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