Hope lies in tatters in Tiruppur as cotton and yarn prices go up

On the streets of Tiruppur, the air is full of the odour of chemicals and dyes used in fabrics. At least one person in almost every family is connected with the textile and garment industry that makes the hosiery, knitwear, casual wear and sportswear sold all over the country.

These days, the acrid odour is still around but the town, in Tamil Nadu, has lost its mojo. The prices of cotton and yarn have gone up, forcing factories to work at reduced capacity while wholesale shops look deserted with hardly any takers for clothes.

“Tiruppur was never like this. These streets were always active with thousands of people visiting our shops during the current months,” said Zakir Ahmed, who runs a wholesale shop, K C Apparels, at Khaderpet.

Located opposite the railway station, Khaderpet is the largest wholesale market in the town. Tiruppur contributed 54.2 per cent of India’s textile exports in the last fiscal.

Despite the pandemic, the hub posted exports of Rs 33,525 crore in 2021-2022, contributing to around 1 per cent of the country’s exports revenue. If domestic markets are also added, the total sales of Tiruppur per annum used to be nearly Rs 75,000 crore.

Holding up some sportswear, Ahmed said: “Even two months ago, this used to cost around Rs 100 per unit, which has increased to Rs 130 now. That itself shows how much prices have increased. But the hike is still only a fraction of what cotton and yarn prices have increased by. We have a limit in how much of the burden can be passed to the consumer.”

Sheikh J, a 30-year-old wholesaler who runs a shop in the Kariya Gounder area of Khaderpet, believes that every small-scale business and indeed the entire economy of the region is dependent on the textile industry.

“At the wholesale market, we are seeing a dip of 30 per cent in our sales. The price rise of cotton and yarn is making life difficult for people like us, who are dependent on it right down the value chain,” said Sheikh.  

According to the data shared by industry sources, yarn prices increased by 112 per cent from around Rs 210 per kg in June 2021 to Rs 446 per kg now.

“Work in most of the garment units has come down. We want the government to ensure that there is a dip in yarn prices, else our margins will get severely hit as we will not be able to fully pass it on to the buyers,” said Ravi Chandran, secretary of the Domestic Garment Manufacturers’ Association.

Based on estimates, a Rs 50 increase in yarn prices may normally lead to an increase of around Rs 18-19. “A major roadblock for us is fixing prices for advance purchase orders. When we take orders three to six months in advance, the unprecedented price hike affects us badly,” said R Senthil Kumar of Premier Agencies, a small and medium enterprise garment manufacturer.

For people like Kumar, the loss of business occurs because medium to small enterprises do contracts for raw materials on a monthly basis. The hike has come as a shock for an industry that was expecting recovery after the pandemic.

According to the Tiruppur Exporter’s Association, the price of cotton per candy increased from Rs 37,000 in June 2020 to Rs 97,500 currently.  

The association wanted a special scheme for micro small and medium enterprises (MSME) under the Emergency Credit Line Guarantee Scheme. In this, 10-20 per cent of the existing credit would be given immediately, mainly to bail out the knitwear garment sector that comprises 95 per cent of MSMEs.

“As an immediate step, we were also demanding the delisting of cotton from the MCX, a ban on cotton exports and steps to ensure that cotton hoarding is not allowed,” said Raja M Shanmugham, president, Tiruppur Exporters’ Association.

The industry also wants the creation of a buffer stock by the Cotton Corporation of India, similar to that of China. Despite being the largest cotton producing country in the world, India stands only sixth in garment exports - behind China, Bangladesh, Vietnam, Cambodia and Sri Lanka.

Several garment manufacturers and spinning mills in Tiruppur have cut down on production, leading to a labour surplus.

“The industry is facing a working capital shortage. Some of the units have reduced production by 30 per cent because of this. We may not be able to stop production though as that may lead to a labour shortage in the longer run,” said Kumar.

Spinning mills, on the other hand, have already started production cuts. Machine speeds have been reduced by 5-10 per cent.

“Right from spinning mills to garment manufacturers, no one is making money. For the past month we have started reducing the speed of the machine. We are suffering losses to the tune of around Rs 20-25 per kg of yarn. If we completely stop production, the number of skilled labourers may fall,” said Siva Balan, director of S P Spinning Mills.

He added that yarn movement has declined by 30-40 per cent compared to a normal May, hinting at an overall decline in yarn and garment manufacturing in the area.  

As to the solution, Ahmed said only ‘government support or god’ can avert huge losses in 2022-23 in Tiruppur and revive the life that used to be on the streets.