This has pushed up the overall number of closed mills in the country to 313 by the end of March 31, 1999. Of them, 207 are spinning units and 106 composite mills. Nearly 74.86 lakh spindles, 25,534 rotors and 60,573 looms are thus lying idle in the organised sector at present.

If one looks back, one may find that the textile industry had to face a very difficult year in 1998-99. That has taken a very heavy toll particularly of spinning mills during the year. The number of closed spinning mills during the year swelled by 80 to 207 from 127. During the same period, the number of closed composite units rose by 13 to 106.

During the cotton yarn industry boom, prior to the fiscal crisis in South-East Asia, many spinning units were set up without any experience, rushed into it. In viewof this rate-race, the number of spinning mills jumped from 777 at the end of 1990-91 to 1489 by the end of 1997-98. Their installed capacity also rose during the period from 26.67 lakh spindles and 67,000 rotors to 33.53 lakh spindles and 2,91,000 rotors.

These spinning mills experienced the worst shock when exports of yarn started facing serious problems after the currency turmoil in some East Asian countries. Not only volumes shrank, but price realisations also went down substantially.This spelt disaster for a number of spinning units as the domestic market for their yarn was also depressed. Several uneconomic units had no option but to close down.

No doubt composite mills were also affected by adverse conditions, particularly in the domestic markets, but the number of closures in their case was not so large. This is because the share of composite mills in the overall fabric production in the country is now just around five per cent, as the decentralised sector has been able to expand its fabriccapacity considerably.

Of course, powerloom units are also affected by subdued conditions in the cloth market, but they adjust their production to the changing market conditions, by keeping some of the looms idle from time- to- time. The spinning industry is not yet able to come out of its problems, resulting from excess capacity and subdued demand both in the domestic and overseas markets.Exporters of cotton yarn, for instance, point out that the start of 1999-2000 has been quite tame. Though some shipments do take place, price realisations are far from satisfactory.

Those who have piled up inventories are being forced to sell even at unattractive prices. For instance, 30s combed is being offered as low as US $2.70-2.75 per kg; 7s OE is being sold around US $1.80 per kg. Count 40s is being traded around US$3.10 per kg.

It is doubted whether such low prices can enable spinners even to recover their costs, except in cases of those units which have some locational or other advantages. The holding capacityof spinners in most cases is limited. Every one wants liquidity to keep wheels of one's factory moving. No one seems to have confidence in the market at present, in view of the prevailing uncertainties in East Asian as well as European markets. The premium on Special Import Licences remains nominal around 2.5 per cent. It has failed to provide any incentive for exports. The possibility of some more spinning mills closing down cannot be ruled out, if the present depressed market conditions are prolonged.