The cotton and blends spinning industry in India is passing through a big crisis, similar to the situation last seen in 2010-11, resulting in huge job losses, according to the Northern India Textile Mills Association (NITMA). High interest rates, high cost of raw materials, rise in low-priced imports of yarn and garments are among the reasons cited by NITMA.
Indian yarn is becoming non-competitive in global markets due to Central and State level taxes and levies being exported in prices. In addition, there is high rate of interest on capital borrowed. The cost of raw materials is also high compared to global prices, resulting in loss of Rs. 20-25 per kg to Indian mills, NITMA said.
As a result, export of cotton yarn from India dropped 34.6 per cent to $696 mn in the first quarter of fiscal 2019-20 from $1.063 bn in April-June 2018-19, as per the DGCI&S data, NITMA said. Moreover, in recent months, there is a rise in imports of yarn and garments from countries like Bangladesh, Sri Lanka and Indonesia, which are able to offer these products at lower prices due to their lower cost of raw materials.
This situation has resulted in closure of approximately one-third of spinning capacity across India, and the mills currently running are incurring huge cash losses and are not in a position to buy and consume the Indian cotton. If the situation persists there would not be any buyers for the upcoming cotton crop of about 40 mn bales (170 kg each) valued at Rs. 80,000 cr.
It would be difficult to get buyers for Indian cotton abroad as well because India still has not moved to globally adopted purely market driven agri-commodity markets with the government directly supporting the farmers at minimum selling price (MSP) level.
“The Indian textile industry, employing over 100 mn people directly and indirectly, seeks immediate attention of the Government of India to prevent job losses and avoid the spinning industry from becoming non-performing assets,” NITMA said.