Apparel exports drop 2.6 % as yarn prices shoot up.

Figures down to $ 10.64 billion, apparel export promotion council seeks removal of import duty.

Although India managed to hold on to the $.10-billion apparel export figure in 2009-10 fiscal fresh data released by the Apparel Export Promotion Council (AEPC) on Thursday indicated that exports from India dropped by 2.64% to $10.64 billion in 2009-10 compared to $10.93 billion in the last fiscal.

Amid high prices of cotton yarn during the current crop year, Tirupur, one of the biggest knitwear hubs of India, saw exports falling by 2.17% by 2009-10 end. Tirupur's exports stood at Rs 11,250 crore in 2009-10. "Exporters are in deep trouble as the garment industry is reeling under unprecedented price hike of yarns and fabrics," said AEPC chairman Premal Udani calling for a 15 % tax on cotton yarn exports.

"The past four months have witnessed a mind boggling 50-80% increase in prices of basic raw material. Just when there were signs of initial recovery, the industry has plunged into a gloom because of high raw material prices and their erratic supply. At a time when domestic demand for fabrics and yarns is booming, free exports of basic raw materials like cotton and cotton yarn take millions of jobs away from the country," he said urging the government to have long-term calibrated exports of cotton and yarn.

As far as possible, exports of raw materials should be discouraged. "The government needs to encourage the readymade garment sector which not only earns more foreign exchange per kg exports, but creates millions of II in the process."

Mr Udani also appealed for removal 16% duty on imports of yams. Over and above the raw material costs, he said, the industry has been impacted by high labour costs, non refund of central and state levies besides infrastructure deficiencies.

Tirupur Exporters' Association president A Sakthivel, too, in the recent past wrote to the Union textiles minister about the disproportionate increase in prices of cotton yam compared to that of raw cotton. "With the removal of DEPB, duty drawback rate benefits available for cotton yam exports and suspension of cotton exports, for reduction of cotton prices, the textile mills had actually brought down the yarn prices by Rs 5 per kg on May I. However, the mills have resorted to the new practice of increasing the yarn prices intermittently, three times in this month itself, against the normal practice of revising the prices in the beginning of the month.

Altogether, the total increase is Rs 25 per kg. Cotton constitutes only 60% of yarn prices, and the increase in the yarn prices should have been 4.33% and not 14.12% as it stood by the end of the month, " he said requesting to regulate cotton yarn exports to soften increasing yarn prices.

Originally published in The Economic Times: 4th June 2010