Spinning industry in a morass: NITMA

21 Jul '16

6 min read

Often wrong and misleading cotton estimates from popular agencies/associations — give a false notion that the country has enough cotton. For instance, crop size in 2015-16 substantially lower than estimated, caught the spinners unaware.

Jain is also critical of the role of Cotton Corporation of India (CCI), especially while disposing of stocks: Describing the CCI “as a trader without any vision of price stabilisation, industry service etc., he said this year small open bids were made by traders for CCI cotton raising the price level everyday which acted as a market indicator for price levels.

“MCX/NCDEX is for hedging and price discovery, however it is 99% run by traders and speculators (many who have nothing to do with cotton) and hence disrupts the physical market equilibrium. No action was taken to rein steep rises in short time, allowing a free run to bulls,” he said adding that curbing volatility of any nature is one of the prime roles of a regulator.

For all the hype created over incentives under the TUF or Technology Upgradation Fund, the NITMA President said delayed TUF payments resulted in beneficiary companies being penalised for system errors while seeking claims.

To add to their woes, retrospective amendments were made to deny benefits to spinners under Incremental Export Incentives forcing them to go to court for justice.

Seeking export incentives for yarn, Jain pointed out that all segments of the textile value chain were given concessions under the MEIS (Merchandise Exports from India Scheme) and Interest subvention except yarn. True, yarn does not qualify as merchandise, but neither is it a product for consumption by end user industry in India, he said.

“India leads in yarn exports not because we are the best, but because spinners have no choice but to undercut and sell yarn in exports to offload the excess spinning capacity,” he remarked candidly.

“Today the way the spinning industry is placed, there seems no hope for the industry – we have excess capacity, which has to be dumped into China at below cost prices to keep the mills running. High fixed costs makes production cuts difficult. As a result NPAs are increasing, mills are partially or fully closing down on the one hand while new ones are coming up on the other hand (due to incentives).

“Old and new mills have a cost differential of 10% in an industry, which doesn't even have a consistent net profit margin of 5%,” he said expressing disappointment that the government is sitting quiet on it hoping that the balance will set in as value addition industries and units grow down the vertical.

In the wake of unprecedented rise in cotton prices this year, only the big mills that had stocked cotton were making big gains, but the health of the majority has gone critical, the NITMA President said expressing the hope that the new Union minister would address their concerns on a priority basis.

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