High cotton MSP may influence growth of textile sector
It seems that plight of garment exporters have taken a never ending route. First it was rupee appreciation and now the 40 percent hike in Minimum Support Price (MSP) of cotton, is making it difficult for the apparel manufacturers tighten their grip in the international market.
To add to their woes, demand for the Indian made apparel in the US and EU market seems to be replaced by made-in-Vietnam clothings, which is gaining its export momentum in these countries.
According to experts even though Indian garment industry has maintained an overall growth rate of around 15 percent in the current fiscal, but hike in cotton prices will definitely curb down its present state.
The textile industry which is already reeling under high interest rates and rising input cost, now, hike in MSP will almost break the backbone of the sector.
In the last fiscal, the MSP for medium staple cotton was at Rs1,990 a quintal and long staple cotton at Rs2,030 a quintal for the cotton year 2007-08. In the current year, revised rates are Rs2,500 a quintal and Rs3,000 a quintal respectively for the cotton year 2008-09.
The Indian textile industry reacted strongly against Government's move of raising Minimum Support Price for cotton by 40 percent. Fibre2fashion took the opinion of different segments operating in the industry.
Cotton Consultant Mr Pankaj Ahir, of Genesis International, says, “The rise in MSP will benefit only cotton growers. Although it is not going to affect traders and consultant, textile mills have to bear the burn of this.”
Supporting the above statement, a textile exporter from South India stressed, “Since from past one and half year textile sector is going through a really rough phase, due to increase in cost of raw material, power crises and various other such problems. 70 percent cost of finished products are affected by the surge in cotton and yarn prices. This in turn is affecting the profit margins and making it difficult to compete with Chinese market. Despite higher cotton yield in the current year, textile mills are not able to purchase cotton due to higher prices. The south Indian textile industry has come under terrific pressure due to MSP price hike.”
In this regard, Mr Sanjiv Bhat, Managing Director, Radico Fashion Pvt Ltd, an apparel exporter, stated, “Increase in raw material prices will effect in cost of finished goods, which in turn is going to effect exports and will be pushing us back from other countries. Now with the increased MSP, exporters are in a fix. Government must provide benefits on export of finished textile goods, to maintain balance between import & export, so that we can compete with foreign markets.”
However cotton ginners are of the different opinion. Mr Chandrakant vachhani owner of Patel Haribhai Punjabhai & Co opined, “This MSP hike is not going to affect the cotton merchants. Government have increased Rs500 per 20 Kgs where as present rate is Rs650 per 20 Kgs.”
Experts are of the opinion, that the government should back the textile industry at a time when major competitors are gearing up to increase their share in world exports. Increased MSP may spell a doom for the Indian textile exporters.
Fibre2fashion News Desk - India