May 13, 2022,
Cotton prices have gained nearly 40 percent in 2022 and are at an 11-year high on the back of a demand-supply mismatch. This is hurting cotton yarn spinners and cotton-based textile and garments manufacturers, forcing many to cut down on operations across the country.
While spinning mills are partially operational, few fabric manufacturers have decided to hit a stop button to their production at least for a few days. Industry watchers estimate that the average consumption of cotton per month has also reduced from around 29 lakh bales to 19 lakh bales per month in India. What is further worrying is the fact that the arrival of cotton is slow during this season 2021-22.
The Tamilnadu Spinning Mills Association has already made three representations to the Textile Commissioner, Mumbai on this matter.
"Many of the spinning mills in Tamilnadu, which contribute up to 40 percent production in the whole country, are running their mills only for five days in a week and many mills are adopting 12 hours of shift and keeping their activities closed for another 12 hours. This means, effectively there is only 35 to 40 percent production going on," says K Venkatachalam, chief advisor of the association.
The yarn spinners in the number one cotton-growing state of India, Gujarat, are bleeding and have reported a cash loss of Rs 30 to Rs 40 per kg. "The rise in prices in the international market and low domestic and international demand is worrying the spinning mills.
While we are happy that farmers get high prices for their produce, we hope the price surge in input cost is distributed across the value chain. The spinners cannot just carry the burden of price rise," says Ripple Patel, vice president of the Gujarat spinners' association.
The government has tried supporting the sector by removing the 10 percent import duty on cotton in April. This move was aimed at encouraging purchases from markets outside of India to address domestic shortages. However, the move may have resulted in a surge in international prices. The global commodity market fears that India, which is the top exporter of cotton, may ban exports and this has pushed the prices to surge further.
Meanwhile, the Spinning Mills Association advisor believes that the rise in cotton prices and issues relating to the non-availability of quality cotton to spin quality yarn in India is because the Cotton Corporation of India (CCI) did not buy any cotton this season since October 1, 2021.
"Traders and multinational companies engaged in the cotton trading have started stocking the cotton and are creating an artificial shortage in the market…" said Venkatachalam. As a result of all this the price of cotton has gone up from Rs 37,000-Rs 45,000 per candy to Rs 97,000 - Rs 1,04,000 in recent months, he adds. These production cuts may not hurt the value chain immediately, but if no measures are adopted, the fear is that the end consumer may also be hurt soon. (Source: www.cnbctv18.com)