Cotton prices, power crunch worry textile industry

The textile industry in Tamil Nadu is now in the throes a severe crisis and the operations are paralysed due to abnormal cotton prices and acute power shortage prevailing in the state since March 1, the Southern India Mills' Association (SIMA) said in a release on Saturday.

K V Srinivasan, chairman, SIMA said in a statement that the industry which has been hit by the 15 per cent appreciation of the rupee against the US dollar over the past year, has also seen 5 per cent escalation in interest rates and 5-10% drop in yarn prices.

This has been exacerbated by a 25 per cent increase in cotton prices and around 25-30 per cent power shutdowns being faced by the textile industry in the state, he said.

As cotton is a seasonal commodity, mills procure the required cotton between November and February every year to produce the desired quality yarn and meet customer requirements.

However, this year, the ills could not cover even 20 to 30% per cent of their requirements, Srinivasan said. He alleged that foreign buyers have been speculating cotton prices from the start of the cotton harvesting season and totally paralysed cotton purchases by the domestic textile sector.

While foreign buyers have covered cotton till December 2008, the buyers have for example, covered Gujarat Shankar-6 cotton for Rs 23,200 per candy for December 2008 under forward cover.

Srinivasan said that though in a liberalized economy, it might be difficult to control such speculation, it is very essential to streamline cotton exports, withdraw the 1 per cent duty drawback extended for cotton exports and also remove import duty of 10 per cent, as well as exempt cotton from the Special CVD of 4 per cent immediately to create a level playing field.

Srinivasan further pointed out that Budget 2008 had failed to consider the pleas of the labour-intensive textile industry which employs over 3.5 crore people across the country.

SIMA has appealed to the Union government to take necessary steps to control cotton prices, failing which the entire industry would become sick, throwing several crores of people out of their jobs, which could lead to industrial and social unrest.

The government should consider allowing exports only through federations like the Cotton Corporation of India (CCI) and the Maharashtra Federation to ensure that only surplus cotton is exported after reserving the required quantity of cotton for the domestic sector, Srinivasan added.

The textile industry in Tamil Nadu has been the worst hit by unprecedented and acute power shortage prevailing in the state, he said.

The Tamil Nadu Electricity Board (TNEB) had announced a one-day power holiday every week which was agreed to by the industries on February 29. But, of late, TNEB has been issuing notices to textile mills to operate gensets during peak hours in addition to the power holiday already in place. Further, there are unscheduled shutdowns ranging from 1 to 2 hours everyday, according to SIMA.

All the above would affect textile production by over 35 per cent in the state and push the textile business into deep crisis, Srinivasan said.

The industry is also worried that with cloth imports doubling, competing countries and other states could take advantage of the situation and become more competitive.

Srinivasan appealed to TNEB to come out with a concrete proposal for distributing the shortage uniformly across the state, announce suitable power holidays and supply power without interruptions.