Cotton yarn spinners set to cash in on export-led boom

Good monsoon, crop size to keep prices viable, increasing profitability of mills

Spinning mills seem confident this year as a surge in the demand for cotton yarn is expected in the export market and domestic apparel and home furnishing sector. The government’s decision, notified on Wednesday, making the export of cotton yarn eligible for benefits under the Incremental Export Incentivisation Scheme for all of 2013-14 will also lift exports.

Many mills are raising headcounts. A good monsoon and a better crop size may help keep the price of cotton viable for the sector in the next few months. According to a study by Credit Analysis and Research Limited, direct yarn exports are likely to touch 1,500 million kg by FY14 from 1,107 million kg in FY13. Major demand would come from China, it said.

T Kannan, chairman of CII Textile Committee and managing director of Thiagarajar Mills, said the competitiveness of Indian mills as compared to China, Pakistan and some South American countries’ had increased in two years. “We have better operational productivities in terms of machine and labour. China had been subsidising power and labour costs to the mills. This has been withdrawn for two years. So, the fundamentals are playing in favour of India.” The revival of the export scheme would provide two per cent benefit in terms of incremental exports, he said. He added to meet the increase in demand for cotton yarn in the domestic and export market, firms may have to do fresh hiring to the tune of 12 per cent to 14 per cent of the present headcount.

According to S P Oswal, chairman of Vardhman Textiles, “Indian mills are making merry as production of cotton yarn in China has slowed. The cotton available to Chinese yarn makers is costlier by 10 per cent. Even after paying an duty on the consignment from India, they save five per cent of cost, and that is substantial.” He added Indian spinners could make hay till the Chinese government intervened.

Withdrawal of the Focus Product Incentive Scheme by the Indian government, according to Oswal, did not make a dent on export earnings as realisations had increased since last year. The secretary-general of the Confederation of Indian Textile Industry, D K Nair, is slightly apprehensive about the price of cotton. There has been an upward trend in the past few weeks and if it continues it may mar the prospects of lucrative returns for millers, he said.

The sector is optimistic over revival of exports but expects the Focus Product Incentive Scheme to be revived, too, he added.

The President of All Gujarat Millers’ Asociation, Dilip Bhai Patel said fears of prices moving higher may subside soon as at higher price there will be attraction to import cotton and as arrivals pick up prices sould correct.