Feb 15: For cotton textile mills engaged in exports, there were reasons to be jubilant about 1997. Most of them had improved their bottomlines following subdued cotton prices, a more liberal export policy and better export orders.Exports of cotton yarn in calendar 1997 stood at a record Rs 6,064 crore, surpassing the year's target of Rs 6,000 crore. The commodity managed to improve its share in total cotton textile exports of Rs 13,028 crore during 1997 to nearly 47 per cent compared to the previous period's share of 43 per cent (yarn exports accounted for Rs 4,760 crore in 1996 out of total cotton textile exports of Rs 11,045 crore).
However, alarm bells have started ringing following the recent decline in cotton yarn export to south-east Asian countries due to the currency turmoil there. Moreover, rising cotton prices, following estimates of lower production this season, are likely to put pressure on the bottomlines of most mills.
The textile industry expects cotton yarn exports from the country towitness a major setback during the first quarter of 1998. In fact, the Cotton Textiles Export Promotion Council (Texprocil) has this time preferred not to fix any target for 1998!
BK Patodia, chairman of the yarn committee of the Council, expects yarn exports for 1998 to be lower than that achieved during 1997. According to sources in the industry, exports would be lower by at least 10 per cent. ``We may maintain the level of exports in rupee terms. But one should consider the extent of devaluation of the rupee,'' said an exporter.
According to DL Lakshminarayanaswamy, former chairman of the Indian Cotton Mills Federation, ``since 1987 we have been surpassing the targets. But it'll be more realistic if cotton yarn export targets are fixed considering the performance of the first quarter.'' Most of the millowners The Financial Express spoke to fear a downslide in the commodity's exports during the first quarter of 1998. The signs of a slowdown are already visible. Though the government liberally enhancedthe ceiling of yarn of counts 40s and below for export to non-quota countries to 200 million kg in various stages, the industry could export only 190 million kgs during 1997.
Exports of cotton yarn of counts 1 to 40s to non-quota countries under the ceiling and against EPCG obligations (which account for nearly 42 per cent of the total yarn exports from the country) totalled only 13.06 million kg in January 1998 (value: Rs 138.91 crore). This compares with 21.57 million kg worth Rs 204 crore exported during the first month of 1997.
Cotton yarn exports, after picking up during the last quarter of the 1996 calendar year (Rs 1,345.42 crore), hit a low of Rs 1,402.68 crore during the last quarter of 1997 calendar, down from the high of Rs 1,552.32 crore achieved during the first quarter of 1997 (Exports stood at Rs 1,490 crore and Rs 1,505 crore for the second and third quarters resepectively).
The first jolt for exporters in 1997 was the change in the `rules of origin' introduced by the European Union forimport of readymade garments from Bangladesh, the highest importer of Indian cotton yarn for the 1996 calendar. It imported Rs 810.6 crore worth Indian yarn in 1997, down by Rs 103 crore compared to previous year (Rs 913.60 crore in 1996).
Next came the currency turmoil in south-east Asian countries which led to the cancellations of LCs and a consequent slowdown in exports towards the fag end of 1997. The share of south-east Asia and Japan in total exports of cotton yarn is nearly 50 per cent.
Exports to Korea, one of the major importers of Indian yarn for 1997 (Rs 626.66 crore), came down during the last quarter of the year by around 43 per cent compared to the first quarter of the year. Export to Taiwan during the October-December 1997 period was down by around 67 per cent compared to the January-March 1997 quarter. Exports to Indonesia, Malaysia, Vietnam and Philippines during December were the lowest during 1997.
Industry sources claim the present downslide would be a temporary one since Indonesia,which along with Pakistan is a major competitor to Indian exporters, has been pushing its yarn at a cheaper rate.
``Indonesia is causing much greater concern than Pakistan,'' agreed Lakshminarayanaswamy.
Indonesia is claimed to have imported enough cotton stock to produce yarn for the next two months. The Coimbatore spinning industry feels once Indonesia runs out of this cotton stock the situation would be reversed in favour of Indian cotton yarn.
Moreover, a recent meeting of member mills of the Southern India Mills Association (SIMA) arrived at a consensus on the need to disseminate information relating to yarn export prices. The step was decided upon to avoid undercutting among member mills. ``If cotton prices remain steady at current levels for the next three months then we will be able to overcome the present crisis. It could give us the edge to be more competitive internationally,'' says Lakshminarayanaswamy.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
