COIMBATORE: The textile industry, which is the second-largest employer in the country, is reeling under a severe crisis similar to the one witnessed in the automobiles sector across India. In the April-June quarter, export of cotton yarn plunged steeply to (-)34 per cent.
“In the past one year alone, 300 spinning and open-end mills in Tamil Nadu have shut down for various reasons. Some of them have been sold out,” says M Jayabal, president of TN Open-end Spinning Mills Association (OSMA).
As per Jayabal’s estimates, close to 1.20 lakh workers have lost jobs due to the crisis in the last one year. While many of them have found work in other sectors, a good chunk are still struggling for employment. “As per official data, till March 2017, 605 spinning mills shut down across India, of which 225 were in Tamil Nadu. There are many spinning mills up for sale, but no one is coming forward to buy them as it costs around Rs 500-Rs 1,000 crore. Equipment in these mills are now lying unused,” says Jayabal.
“The industry is witnessing a crisis similar to the one in 2010-11,” says the Northern India Textile Mills Association (NITMA), while blaming it on the high State and Central taxes and levies, which have made the Indian yarn ‘non-competitive’ in global markets.
The high cost of raw materials and the import of cheap yarn from countries such as Bangladesh, Sri Lanka and Indonesia have also affected the business, resulting in an approximate loss of Rs 20 - Rs 25 per kilogram for Indian mills.
Combined, these factors have allegedly resulted in the closure of one-thirds of spinning mills across India in the last one year, says NITMA. The ones that have managed to survive are incurring huge cash losses.
NITMA has appealed to the centre to extend the scheme for rebate of State and Central taxes and levies (ROSCTL) to cotton and blended yarns, and an interest subvention on yarn exports. It has also appealed to the government to pay the difference between minimum support price and the market price of seed cotton to farmers via direct transfer.
China, Pakistan have a role to play
Industrialists from Tamil Nadu say that under normal circumstances, a minimum of 100 million kilos of cotton yarn is exported every month. However, in June this year, only 57 million kilos were exported, the lowest in the last two years. Sector specialists attribute the slump in demand to the trade standoff between the US and China, and the free-trade agreement between China and Pakistan.
Betting big on the demand from Chinese markets, major industrial expansion activities were carried out in the recent past. However, over the last decade, China has switched to buying from Bangladesh and Vietnam, cutting off the supply from India almost fully, pushing the sector here into a state of chaos.
Despite the slump in exports, production of cotton yarn witnessed an increase of 6.3 per cent this year. Production of blended and 100 per cent non-cotton yarn grew 18 per cent. Overall, production of spinning mill yarn grew 9.6 per cent this year. “The high cost of raw materials is affecting Indian yarn in export markets,” says D Prabhu, convenor of Indian Texpreneurs Federation.
“India must use the US-China trade standoff to its advantage, and aggressively push our apparel exports to US markets. That apart, banks must be directed to pass on full benefits of cuts in key lending rates by RBI, to industries. These measures could revive the sector,” says Prabhu, adding that festival season could boost demand in domestic markets in October.