Rising cotton yarn price hit garment export, falling rupee offers no relief

Prices up by 8% in June and another hike is in the offing

The knitwear industry in Tirupur, which does business worth Rs 500 billion of which half is exports, has urged the mills not to increase cotton price further, as exporters are already struggling to survive. The falling rupee has given no respite to the industry as the price of yarn, its key raw material, has zoomed. Competing countries’ currencies also falling, taking away the low rupee advantage. 

Raja M Shanmugham, President, Tirupur Exporters Association, said cotton yarn price has risen by Rs 20 a kg this month to Rs 240 per kg for 40 count yarn. Going by strengthening cotton prices, industry fears another hike of Rs 5 per kg in July.

The price hike has put the knitwear garment export sector in a difficult situation, hard to sustain in the competitive global environment. 

Shanmugham said the beleaguered knitwear export sector has been passing through a challenging business environment following the implementation of GST. This was evident from the continuous decline of knitwear exports month after month since October 2017, after three months transition period was over. He added that exports declined as much as 21 per cent during the second half of 2017-18.  

The most worrying factor is that the negative growth trend in exports is continuing in the current financial year and the average decline of knitwear exports in the month of April and May was 34 per cent.

Shanmugham added that the knitwear sector is now only booking the orders, business have now started to look ahead and poised to bring back the industry from brink after prolonged one year period lull and at this point of time, the increase in yarn prices would derail the industry and the aftermath effect would be severe as not only the knitwear garment sector will get affected but also there will be a boomerang effect on the Textile mills. Considering this crucial concern and the overall benefit of textile industry, he appealed to the Textile Mills not to increase the cotton yarn prices and also not to stop cotton yarn supply.

Exporters from Tirupur have met the Union Minister of Textiles Smriti Irani and requested to mandate the cotton corporation of India to ensure the availability of sufficient quantity with desired quality cotton to protect the interest of farmers, textile industry and also employment. 

The point of contention is that the impact of increase in cotton prices has made the textile mills to increase the yarn prices which ultimately affect the downstream value added sectors like weaving, knitting, garmenting, made ups etc, particularly value added exporters as they could not revise the price upwards immediately as the prices were fixed more than three to five months ago.

He said, cotton crisis arisen further to wrong policies of CCI and emphasised the need to cut down the escalating cotton prices.