The Tirupur Yarn Manufacturers Association has called for support from the garment units in seeking steps by the Union government to change the role of the Cotton Corporation of India (CCI).
The China National Cotton Reserves Corporation maintains more than a year’s cotton stock and ensures stability in cotton prices. The CCI should, as such, not only procure cotton from the farmers at Minimum Support Price but also keep stocks and support the textile industry with stable raw material prices, the association said in a memorandum to the Apparel Export Promotion Council (AEPC) and the Tiruppur Exporters Association (TEA).
Office-bearers of the Tirupur Yarn Manufacturers Association met A. Sakthivel, chairman of the AEPC, and K.M. Subramanian, president of the TEA, on Saturday. They pointed out that many garment buyers and brands nominate specific ginners for cotton procurement, leaving spinning mills with limited access to credit.
The mills make upfront payments to buy cotton from the nominated ginners. However, many garment manufacturers continue to avail of credit from the mills for long durations. This has resulted in a significant working capital imbalance across the textile value chain, it said.
Yarn price is influenced by cotton price that accounts for 65%-70% of yarn manufacturing cost. The steep increase in cotton prices (around 30% in the domestic market and 50% in the international market) reflected in the yarn prices. With international cotton prices softening to 82.17 cents a pound from 91.55 cents a pound, yarn prices also declined to ₹379 a kg from 384 a kg.
Further, over 70% spinning mills could not modernise in the recent years as yarn exports were sluggish. Of the 45 million spindle working capacity in the country, over 20 million are more than 10 years old. If the mills do not modernise, there will be shortage of yarn, the yarn manufacturers reasoned.
In such a situation, the association sought the support of the garment sector for total removal of the 11% import duty on cotton and modifying the role of the CCI. The garment industry should also ensure timely payments to the spinning mills within the mutually agreed credit terms. “We seek your cooperation in ensuring a more balanced payment mechanism across the value chain, particularly in view of the prevailing financial pressures on the spinning sector,” the yarn manufacturers association said.
