Come Saturday (July 15), the spinning mills across Tamil Nadu, will stop production and the sale of yarn. This after the MSME Spinning Mills Associations held a meeting at Coimbatore where it was unanimously decided to hit pause due to heavy losses incurred by the spinning industry. MSME is the abbreviation used for micro, medium and small enterprises.

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“For the first time in the last 20 years, exports of yarn and textiles have declined by around 28 percent,” a spokesperson for the South India Spinners Association claimed.

The cotton prices continue to remain high (but better than last year's level), but that has been offset by the rise in import duty since 2021. “Due to 11 percent import duty on cotton, the price of domestic cotton is 15 percent higher. As a result, India has lost many international orders and is unable to compete with neighbouring countries in the export of yarn, fabric and clothing,” a spokesperson for the association stated.

The unrestricted import of yarn and fabrics from countries like China, Vietnam and Bangladesh, is hurting the entire textile value chain, the association added.

A mill in Tamil Nadu has been suffering a loss of 1 lakh per day for every 2,500 kg of yarn it produces per day.

The cost is Rs 235 per kg of 40’s yarn, which is a type of yarn based on how fine it is. For example, a 40’s yarn is finer than a 20’s yarn. The cost of clean cotton is Rs 194 per kg. And that means, the spinning mill makes only one rupee per kg of cotton converted to yarn. That’s half of what’s needed for the mill to stay afloat, according to South Indian Textile Research Association.

As per India Spinning Mill Owners Association based in Coimbatore, “As the mills are forced to incur huge losses, unable to meet the expenses of bank loan repayment (principal and interest), cotton purchase payments, electricity bills, etc., the mills are at a standstill. The body believes if the situation persists, the mills will have to resort to permanent closure.”

Similar fears are evident in Gujarat too, the other big hub for India’s cotton industry. "We are watchful of the situation. Considering we operate in an advanced sales model, we don't have to cut down on production at present," Ripple Patel, vice president of the Gujarat Spinners' Association told CNBC-TV18. The cushion for Gujarat spinners as against the Tamil Nadu peers is that they work 35 days in advance.

Also read: Textile mills struggle as cotton price hits 11-year high

According to Patel, if yarn prices don’t rise before August 16, even the mills in Gujarat may have to cut down production by 15-20 percent. "Different regulatory norms hurt the Indian textile industry," he added.

The industry, in both Tamil Nadu and Gujarat, wants a reduction in import duty, a unified policy, and more emergency loans to tide over the current crisis. The spinning mills in Tamil Nadu have also asked for a cut in electricity tariff, which pushed their cost of production up by 6 percent.

First Published:Jul 14, 2023 2:49 PM IST