The predominantly cotton-based Indian textile industry has incurred a loss of over Rs. 15,000 crores in the current financial year due to high volatility in cotton and yarn prices. Even the best managed textile companies are incurring huge cash losses. The same is the case with synthetic fibre manufacturers who maintain parity with cotton prices. A levy of 10 per cent on branded readymade garments and made-ups and duty-free access agreement entered into with Bangladesh have added to the woes of the textile industry.
The industry has appealed for a financial relief package for its survival. The Minister of Commerce, Industry and Textiles convened a meeting of all stakeholders to assess the gravity of the problem facing the industry. On the occasion, CITI and SIMA appealed to the Minister to ensure raw material price stability and a level playing field in respect of pricing and cost of funding in view of the stiff challenges from competing countries in the open market.
Mr. S. Dinakaran, SIMA Chairman, has proposed a freight equalization tax of Rs. 2,500 per tonne on cotton export, as the mills in the south spend more on transportation than those in China, Bangladesh and other competing countries. They have to procure more than 75 per cent of cotton from far-off places like Gujarat and Maharashtra. The cotton transportation cost has gone up due to an abnormal increase in diesel prices.
According to him, mills in China, Bangladesh and other rival countries are able to carry the raw cotton in foreign vessel through the sea route and thus are able to transport cotton at less than 40 per cent of the transportation cost as compared to mills in south India.
Further, textile mills in Tamil Nadu that consume 47 per cent of the cotton grown in the country produce less than three per cent of their requirement.
Mr. Dinakaran has suggested that the cotton export policy be framed in such a way that the neighbouring countries do not derive the competitive advantage. Parliament has already passed a Bill to levy up to Rs. 10,000 per tonne so as to have a level playing field in marketing.
Cotton prices started soaring in the last few days, while yarn prices are moving down in certain markets, particularly for fine and superfine varieties. In fact, cotton prices have moved up by Rs. 1,000 per candy of 355 kg as cotton exporters are covering a huge volume in the hope that they might get export incentive for export. At this rate, it is feared that cotton prices would go below MSP and farmers might get affected.
Mr. Dinakaran has urged the Government to take a fair view of the industry plight considering that over 92 million jobs and over Rs. 2 trillion investments are at stake.