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Cotton yarn price hits exports

A new problem has cropped up for the textile manufacturers in the hosiery belt of Tirupur. The price of cotton yarn has become too much for them to bear. Political parties and the trade unions are cashing on this. Posing to support the manufacturers’ stand, they are resorting to an agitation to draw the attention of the government to the plight of the industry as a whole in the belt. Recently, all political parties barring the two ruling ones - Tamil Nadu’s AIADMK and the Centre’s BJP - joined hands to announce a 12-hour bandh. They have said that they are perturbed by the abnormal rise in the price of cotton yarns - somewhat around 50 per cent in the last one month itself. Why are they worried over this issue which should vex the manufacturers alone? Because, they say that following the abnormal increase in the cotton yarn prices, the cost of production of the hosiery products had risen, upsetting the exports. Consequently, the manufacturers are unable to recover monies for the shipment products and this simultaneously affects the employment and wages of the workers as well. “This has affected the working of the hosiery, powerloom and handloom units alike. The biggest issue ahead is the uncertainty. There is no guarantee that the products would be sold unmindful of the price. On the other hand, there are complaints from the importers that they are regularly requested for price revision on the guise of input cost rise. No importer agrees to this. So, the loss is tangible,” a factory owner told this columnist.

Likewise, a trade union said that if the union failed to support the factory owners in such matters, the working community would be irreparably hit. “Our livelihood is dependent on the good being of these factories. It is not a joke to expect permanent employment when the factories are unable to recover monies for their products,” a union leader explained. The factories themselves are upset and have planned to stage a protest. “Since the unions also wish to support our cause, we think it fair to join them during the proposed bandh rather than to act separately,” a representative of the hosiery manufacturers’ association said. Meanwhile, the powerloom industries have pointed out that the sharp increase in the price of cotton yarn did not arise only because of the rise in the price of cotton, but the free export of cotton yarn. This follows the inadequacy in production to meet the demand. The Confederation of Indian Weaving Industries has said that the increase in the price would lead to a reduction in exports of powerloom products. On the other hand, reports indicate that importers from some countries like Korea have chosen not to buy the Indian yarns because of the unremunerative prices. Already, the orders from the South East Asian countries have tapered. To woo the importers, the producers are working with the exporters to lower the price, but with the input cost shooting up, they are unable to do much. At the same time, some importers contend that they have stocks running up to their requirements for the year end. They point out that even if the price situation normalises, they may not pick up more yarn now. “We could consider fresh purchases in the New Year,” Kim Kyun, an importer’s agent told this columnist.

But, that is also causing worry to the Indian exporters. If they have covered up their demand till year end, where did they buy their yarn from? The possibility is that they are skipping India in view of prohibitive prices and going in for other sources of supply, they believe. This is possible because, in the last one month, the prices of cotton yarn had shot up by Rs 1,000 a candy. Also, even as the exporters contend that no shipment is taking place, the price rise continues unabated. So, there are other factors that is spiraling the price rather than lower supplies or increased demand. Be that as it may, the cotton production is on the rise. There is no reflection of all these trading developments in the arrival of the cotton to the market. The new crop is giving the traders a tough time to cope up with, because of substantial arrivals in the market. Presently, about a lakh bale comes to the market all over the important centres in the country. For the current cotton year, following good harvest in Madhya Pradesh and Maharashtra, the cotton production is estimated at 170 lakh bales of 170 kgs each against 135 lakh bales last year. Added to this, the area under the Bacillus thuringiensis (Bt) cotton has almost trebled leading to the prospects of increased production. This follows the farmers in MP and Maharashtra enjoying a good result of this variety in the recent times. So, with a high crop on the one hand and the normal demand on the other, there is a definite reason for the cotton scenario to be prospective. That is when the sudden spurt in the price of the cotton yarn has caused some upheavals on the export for the segments of the industry. But, whether the exports would be continuously affected remains to be seen as some sections hold the view that such factors are highly temporary. That’s what the industry wishes any way.

- P S Sundar