Sops give marginal relief to spinners, Mr Thulasidharan
The recent removal of import duty of 10% and special CVD of 4% on cotton has given only a marginal relief to the Indian spinners by creating a level playing field in the globalised environment, reacted Mr J Thulasidharan, Deputy Chairman, SIMA on the recent government measures.
In a Press Release issued, Mr Thulsidharan opined that though steps taken by the government were in the right direction, these steps have eased out the local cotton price only marginally i.e., to the extent of Rs.500-750 per candy and still, the Indian cotton is costlier than the imported cotton.
The Indian cotton prices have been speculated very abnormally during the current cotton season, from Rs.19,000/- to Rs.30,000/-, a candy of 355 kgs.
Therefore, the woes of the Indian cotton textile industry have not been fully addressed. Portraying the cotton price increase during the current cotton season for S-6 cotton variety, Mr Thulasidharan pointed out that the increase was over 58% mainly due to the huge exports of cotton.
At its meeting held on January 11, 2008, the Cotton Advisory Board (CAB), Ministry of Textiles, Government of India, earmarked 65 lakh bales for exports and estimated 310 lakh bales as the total production during the cotton season 2007-08 as against 58 lakh bales of cotton export during the previous season.
Mr Thulsidharan has stated that over 100 lakh bales have been exported as against 65 lakh bales of CAB estimate depleting the cotton stock-to-use ratio less than 18% as against 42% level maintained by the competing countries like China.
Mr Thulsidharan has felt that it is unfortunate that the multinationals cotton traders commanding the Indian cotton business, covered large volume of cotton who are able to get unlimited finance at less than 3% interest rate as against 2 to 2.5 months working capital loan availability to the Indian spinner at 15% interest rate.
He further cited that the escalated cotton prices, though pushed the Indian spinners into heavy cash losses, considering the recessionary trends prevailing in the industry, they could not pass on fully the escalated cotton prices.
Mr Thulasidharan said besides the cotton, the various other input costs like transport, fuel, labour, high bank interest rates, etc, also shot up abnormally.
Tamil Nadu, which accounts for more than 47% country's spinning capacity, was plagued with acute power shortage during the cotton season and the machinery capacity utilisation dropped over 30% in most of the spinning mills thus sky rocketing the cost of production.
Table 1 and 2 highlight the cotton cost, yarn manufacturing cost, yarn price and the margins for producing the major hosiery yarns using S-6 cotton.
While admitting that the prices of yarn have gone up by 17% during the current cotton season, he pointed out that the cotton prices have gone up by 39%.
Even in absolute terms, the clean cotton price has gone up by Rs.23 per kg, whereas, the yarn price has gone up by only Rs.19 per kg.