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Small textile exporters squeezed between costs and buyers bargain

Price rise of cotton in the past two weeks has made operations for the small and medium-scele players unviable

Komal Amit Gera  |  Chandigarh 

The textile clusters of Haryana, located in and around Panipat, are in dire straits.

While the weakening of the rupee against the US dollar brought windfall gains for most big exporters, the medium and small-scale textile outfits in Panipat are juggling with increased input costs (increased cost of cotton and imported fibre) and lack of access to financial instruments.

Price rise of cotton in the past two weeks has made operations for the small and medium-scale players completely unviable.

Talking to Business Standard, Ramesh Verma, President of Panipat Handloom Exporters Association, said the sliding rupee made business cumbersome as the small players do not resort to financial instruments like hedging. He added that the exporters from Panipat sell their products across the United States, Europe, Canada, Australia and New Zealand. But the mode of payment of Indian rupee is in US dollar so the business has been effected.

The buyers negotiate their terms with the small suppliers and whatever margins are created due to falling rupee are eroded.

The rising cost of cotton came as a last straw in the camel's back. The prices of cotton and polyester increased by 15 per cent- 20 per cent in last few days. This has put the business out of gear.

The price of cotton, according to sources in the market, was hovering around Rs 39,000 per candy to Rs 40,000 per candy. This has now accentuated to Rs 41,000 per candy to Rs 42,000 per candy. This reflects an increase of about Rs 2000 per candy. The small players cannot maintain inventories of raw material so are badly hit.

The cotton price is likely to spiral further as the new crop will arrive in October. The demand for cotton is higher this year due to higher exports of cooton and demand by the garmenting sector.

According to Verma, there are clsoe to 5000 units engaged in textile business in Panipat and about 400 of them are into exports business.

The cluster exports rugs, mats, bed covers, furnishing and a host products made on power and handloom. There are approximately 50,000 handlooms in the town.

Panipat exports textiles worth Rs 4,000 crore and its contribution to the domestic market is about Rs 14,000 crore.

The lack of infastructure and erratic power supply has made the business uncompetitive. The high cost of captive power (Rs 10 per unit) has already put the entrepreneurs under stress, told another entrepreneur who did not wish to be quoted.

According to Verma, the Government should provide some support to the small players at such juncture by creating a special corpus.

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First Published: Tue, July 09 2013. 20:14 IST