The government's decision to control the export of cotton yarn by announcing registration of cotton yarn exports with immediate effect, news of suspending the 7.67% DEPB benefit and imposing a prohibitive duty on cotton yarn exports, has sent shock waves among spinners. Shri Ashish Bagrodia, President, NITMA in a press statement stated that the cotton yarn prices have increased because of abnormal increase in raw cotton prices.
The prices of raw cotton have increased from Rs.23000 to Rs.29000/ candy in last 3 months and remained higher than the Minimum Support Price this season. The Labour cost had almost tripled during the last three years and the industry has been facing severe power shortages in various states obviously affecting production costs and availability.
NITMA President stated that most of the mills had approached banks and institutions for financial restructuring of debts as they incurred heavy cash losses to the tune of 8-10% on their turnover due to the economic crisis worldwide.
It appears that the present UPA government is once again going back to the era of Licence Raj which took years for the country to get rid of. Such a move has heavily dented the image of our country with foreign buyers who once regarded India as a non reliable supplier and it took years for the efficient spinning industry to convince their export buyers otherwise and helped the country capture 25% share in the world markets.
Shri Bagrodia stated that there was a shortage of cotton yarns and fabrics the world over and added that the ideal policy would have been allowing the spinning and cotton farming to remain profitable and help creating the necessary capacities to remove supply side constraints. Further the spinning industry is the only section of the Textile value chain providing inclusive growth through employment in the backward areas of the country.
These steps appear to have been taken to appease a section of the Textile value chain based in certain part of the country. The garmenting sector with low labour productivity as compared to competing countries, disproportionately high overheads, high costs of zero discharge have all rendered the Knitted garmenting sector entirely non-competitive.
While other countries in the garmenting sector have been increasing their exports over the last few months due to increased demands from the US and EU markets, the Indian garmenting sector continues to be in trouble due to their inefficiencies.