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| Spinning mills on one-day strike tomorrow |
| Press Trust of India / New Delhi May 22, 2011, 15:00 IST |
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Spinning mills across the country will close operations for a day tomorrow to protest withdrawal of incentives and curbs on cotton yarn exports by the government, the Confederation of Indian Textiles Industry (CITI) has said.
There are 3,000 spinning mills across the nation and all of them will participate in the strike, CITI Secretary General DK Nair said. The main hubs of these mills are in Tamil Nadu and Punjab.
The shutdown of units for a day on May 23 would be followed by a production cut of 33% for a week. The daily production is 10 million kgs. The industry would review the situation by the month-end, he said.
"The one-day closure and production cut would lead to a loss of Rs 200 crore and about Rs 500 crore, respectively," CITI Chairman Shishir Jaipuria said.
The government had restricted cotton yarn exports to 720 million kg for the past fiscal which resulted in mills developing inventories.
"There is no consistency in the government policies. Cotton yarn exports ceiling has diverted several regular importers to other markets, like China and Pakistan," Jaipuria said.
In the last five weeks, 50 million kgs of cotton yarn was exported against 70-75 million kg in the same period last fiscal, the CITI said.
While the government has since allowed cotton yarn exports under the Open General Licence, the inventories have built up also owing to crash in prices.
Spinning mills are holding a stock of about 500 million kgs (including last year inventory).
This has completely eaten into the working capital, CITI said, adding there is a decline not only in global but also in domestic demand.
"Demand for yarn in the domestic market is low as the consumers are expecting a further decline in prices of the commodity. Also, there is less demand from garments makers due to imposition of an excise duty of 10.3%," CITI said.
Cotton yarn prices are in sync with the natural fibre rates which have been on a declining trend, since April this year taking a cue from global prices.
Cotton prices are ruling at about Rs 42,000 per candy (356 kg each) from Rs 62,500 in the same period last year.
CITI asked the government to restore Duty Drawback facility and Duty Entitlement Passbook (DEPB) scheme, with retrospective effect. The government had withdrawn both the schemes in April last year.
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