Crisis in spinning industry - 1/3rd production cutback from May 24
Faced with an extremely grim situation arising out of huge decline in demand and prices of cotton yarn and consequent piling up of huge inventories, CITI organised a meeting of all major textile associations of India in New Delhi on 18th May 2011 to discuss the problems being faced by the sector.
While lamenting that the situation is unprecedented in the textile industry, it was unanimously decided in the meeting that spinning mills in India would be closed on 23rd May 2011. From 24th May onwards, it was decided to have a production cut back of 33.33 percent (1/3rd) of existing daily production. Such a drastic step was needed to ensure a reasonable price and boost up the sagging demand for the cotton yarn.
It was also decided that a review meeting off the stakeholders will be called on 1st week of June 2011 to take stock of the price and demand position and to chalk out further action. “Our sincere hope is that with the support of the government and cutback in production the crisis situation will be blown over and the industry will be back on the rail” textile leaders opined.
Briefing the press in New Delhi along with heads of other textile associations, Mr. Shishir Jaipuria, Chairman, Confederation of Indian Textile Industry (CITI), said that a combined representation has already been sent to the Textile Minister, Commerce Minister and senior officials in the ministries of Textiles, Commerce and Finance highlighting the current problems of the textile industry.
Mr. Jaipuria explained that short-sighted Government policies with reference to both cotton and cotton yarn in the recent past have converted a profitable spinning industry into a crisis ridden sector during the last few weeks. The leaders of various associations explained that the following urgent steps would be required to prevent the current crisis from deepening further.
(i) The Drawback facility on export of cotton yarn was withdrawn on 29th April, 2010 and the DEPB benefits on export of cotton yarn was withdrawn on 21st April, 2010. Both these facilities may be reinstated with retrospective effect immediately.
(ii) An Excise duty of 10.30% was imposed on manufacture of garments. We request the government to withdraw the Excise duty on garments to perk up the consumer demand. This should be done at least till the GST is introduced.
(iii) An announcement may be made by Government that no restrictions would be placed on export of cotton yarn in future so that mills can start winning the confidence of their buyers which will now take a long time since the damage has already happened and buyers have moved to the competitors. This will also help in resuming the investments in the production of cotton yarn.
(iv) Providing 2% interest subvention for all textile and clothing products i.e. all products falling under chapters 50 to 63, excluding fibres.
(v) Since the spinning mills are incurring huge cash losses, government may consider giving one year moratorium period for repayment of loans and interest and also exempt this period for TUF eligibility so that NPAs are avoided.