Sectors within the textile value chain seem to be at loggerheads with one another.
The spinning sector and the garment exporting sector have been waging a war against each other for a few years now.
This rivalry, which has not exactly been under wraps, is now in the open, with the spinning industry accusing the garment exporters of lobbying for the downfall of one sector of the textile industry.
It became obvious, when the garment exporters hailed the Government’s decision on withdrawal of the FMS and Incremental Export Incentivisation Scheme for cotton yarn. The spinning sector saw the withdrawal of such benefits as a setback, considering that the mill sector, after concerted efforts, managed to enter newer geographies.
Short-sighted approach
Terming the decision a “short-sighted approach,” the Chairman of the Southern India Mills’ Association, T. Rajkumar said inconsistent policies would mar the image of the country.
Bringing to mind the 2010-11 scene, when the Government announced the suspension of yarn exports, he said “the industry faced its worst-ever crisis that year in its 150-year history. The Government ultimately announced a debt restructuring package of Rs 35,000 crore to bail out the ailing spinning sector.”
“The package was not practically implementable because of rigid RBI norms, but the sector managed to take advantage of improved market conditions,” he said stressing the need for a stable policy “at least for one year,” Rajkumar said.
Urging the Centre to restore the FMS and incremental export incentivisation scheme with immediate effect to sustain the image of the country in the global market, the Chairman of this apex body of spinning mills in the South said the FMS was announced to offset the high freight cost and enhance the export competitiveness of the Indian manufacturers in select international markets.
After concerted efforts, the spinning sector managed to capture new markets in African countries, Latin America and countries in CIS, Peru, Venezuela, Chile, Argentina, Morocco and Tunisia. Many spinning mills have over three months export commitments to these countries.
The abrupt removal of FMS and incremental export incentive scheme by the DGFT with effect from September 25 therefore came as a rude shock.
He further pointed out that Peru was the largest importer of Indian yarn. “The Ministry of Textile and Commerce encouraged us to export to Peru,” Rajkumar added.
On yarn production and stock position, he said “we have adequate stock. It has risen from 95 million kg last year to 125 million kg now and the production, which was 290 million kg last year has increased to 325 million kg this year.”
Coming down heavily on the garment exporters’ allegation about the spiralling rate of cotton yarn, he said “the member mills of SIMA did not tinker with the rates. It is market-driven. There is a glut of yarn stock at present causing liquidity crunch to the mills. Yarn prices have started to drop by Rs 5 to Rs 15 a kg making the mills incur marginal losses.”
Çotton was ruling at Rs 32,900 a candy in the first week of October 2012, when the price of 40s hosiery yarn stood at Rs 228 a kg. The white fibre has now risen to Rs 48,500 a candy, whereas the 40s count hosiery yarn has increased only to Rs 256/kg.
“Yarn price should have increased by Rs 55-60/kg to take care of the increase in cotton price and other input costs, but it has gone up by only Rs 28/kg. It is not healthy for one sector to find fault and kill the other,” the SIMA Chairman said.