The current status of the textile mills in Tamil Nadu are uncertain and uneconomic owing to factors like rising yarn stocks, increasing cost of cotton and above all power shortage, according to KV Srinivasan, chairman of Southern India Mills Association (Sima).
Srinivasan said that the increasing yarn stocks has been a major problem yet to be looked into by the government. Yarn stocks have almost doubled owing to slump in the market and over 20% fall in capacity utilisation in most of the mills mainly because of power shortage, interrupted power supply and the high cost of captive generation.
SIMA sources told FE that cotton yarn stock held by 104-member mills at the end of September 2007 was 12.97 million kg compared to 7.26 million kg at the end of September 2006. High cost of cotton has been a major problem for the mills in Tamil Nadu, which consume about 83 lakh bales a year. Local production is only five lakh bales. Spinning mills in Tamil Nadu buy cotton from Gujarat, Maharashtra, Punjab, Haryana and Rajasthan.
According to data compiled by the South India Cotton Association (SICA), rice of Punjab cotton (J-34) per candy as on November 7, 2007 was at Rs 1,900 against Rs 17,30 in the previous year. There has been similar increases of Rs 2000 to 2,500 for cotton from Gujarat, Madhya Pradesh and Andhra Pradesh. Also the Tamil Nadu mills have to incur expenses towards transport cost ranging from Rs 950 to Rs 1,650 per candy. Additionally, they have to pay 3% CST for which no credit facility is available. Insurance premium ranging from 0.5% to 1% is also to be added to the cotton cost.
