Yarn woes for Tirupur firms

High input prices and irregular availability hinder exports, growth.

The Tirupur knitwear industry, source for 80 per cent of the country’s production, says it has lost around Rs 200 crore till date due to the continuous increase in yarn price.

Exporters from this town say they’ve stopped taking new orders from customers, since yarn prices are not stable and the material itself is often not available. The industry has decided to increase prices by 15 per cent, to partly compensate the increase in raw material cost, say the exporters.

Even so, it will be nil growth this year for the industry, is the warning. The volume of exports in the first nine months of this calendar year are down five per cent, says the industry.

A Sakthivel, president of the Tirupur Exporters Association, said stability of the yarn price and its availability are the two major concerns for the industry, which directly clocks Rs 12,000 crore from annual exports and another Rs 1,000 crore through domestic sales.

In August 2009, the yarn price was Rs 139 a kg. It is now Rs 250 a kg. “Despite this, there is non-availability of yarn,” he said.

In March, yarn prices were quoted at Rs 165 a kg and exporters started booking orders. But textile mills stopped delivery for 15 days and increased the price to Rs 182 a kg. Exporters then booked their export orders at this price. Again, in mid-May, mills stopped deliveries and increased the price to Rs 202 a kg, said Sakthivel.

“Exporters who booked the orders were not able to deliver the goods to buyers as the increase in yarn price was too high. But many exporters had to buy the yarn at the higher price and sent the goods at a loss, after taking into account their long relationship with buyers,” he said.

Saying the current situation was “crazy”, D Prem, chairman and managing director of Prem Durai Exports Pvt Ltd, one of the largest in Tirupur, said the industry’s price increase of 15 per cent was to partially compensate this loss, which would not be enough. “We have to increase the price by at least 30 per cent, which the customers are not willing to absorb. We’re running the units because we have to continue,” he said.

C Nataraj, director, Stencil Apparels, said: “Most of the units have stopped taking orders, since raw material is not available and this year our company alone will report at least 15 per cent negative growth.”

According to mill owners, continuous rain has affected the cultivation of cotton and most of what has been cultivated is being exported, since the quota set by the Union government ends by December 15. Besides, mill owners are getting spot payment from customers abroad, whereas domestic customers are asking for 30-45 days credit.

They noted the price of yarn in the export market is Rs 15-20 a kg higher than in the domestic market. Cotton prices are Rs 7,000 higher per candy (356 kg) than in the domestic market, so the mills are focusing on the former. They hoped the prices would come down by mid-December, subject to the government decision on whether to extend the export quota.