The lower rungs of the textile industry ? spinning and garment ? are facing an unprecedented crisis owing to high input and labour costs. There is an element of blame game between the spinners and knitters. The knitwear units in Tirupur blame the spinning mills for pushing up yarn prices. They also suspect the operation of a cartel. Higher exports of yarn, according to them, should be another reason for the price rise.
The spinners plead helplessly, saying they are facing rapidly rising cotton prices, longer power cuts and increasing power and labour cost. The spinners association, Southern India Mills? Association (SIMA), cannot meddle with the commercial activities of the mills and it was unlikely that over 3,300 mills spread across the country would be acting in unison. But they also say that Tirupur has to mend its own ways by modernising production process, increasing labour productivity and reducing environment cost.
SIMA chairman J Thulasidharan said in Coimbatore that concerted efforts and special packages would benefit the entire textiles value chain, beginning with the spinning sector. He suggested that steps should be taken to ?calibrate cotton exports during peak cotton season and make the industry take advantage of the home grown cotton; provide working capital assistance to the spinners to source adequate quantity and quality of cotton during season; have a level-playing field with multinational cotton traders and supply uninterrupted power to the textile industry at an internationally competitive rate (exempt textile industry from power cut and peak hour restriction).?
He also prescribed working capital assistance to garmenting sector to enable them to get smooth supply of yarn and maintain optimum inventory; bench mark the garmenting sector with Bangladesh / Sri Lanka and help to improve the labour productivity; reduce cost of production and provide necessary assistance to reduce cost of dying and effluent treatment.?
Thulasidharan said after the economic crisis in 2008-09, all investments and modernisation in the textile industry came to a standstill and no new capacity was created for almost two years. Spinning sector is highly capital, power and labour intensive (these factors account for 80% of the cost of production).
The sector has a lower profit margin of 4 to 6% of the sales turnover, and the investment to turnover ratio is less than 1. Normally, the power cost is 8% on sales turnover in AP and 12% in TN; at present it is over 18% due to higher power tariff, private power purchase, reliability charge power and diesel power.
About the increasing labour cost , he said, ?in Tamil Nadu, the daily wages were ranging from Rs 130 to Rs 150 during 2009. But today, it is between Rs 230 and 260.?
Above these two costs were the rising price of cotton, which has been a global phenomenon. Clean cotton cost per kg of yarn has increased by almost Rs 21, Thulasidharan added.
He added that yarn export had fallen to 400 million kg during January ? October 2009 from 555 million kg during the same period of the previous year. ?Spinning sector has made huge investments to cater to the world markets and today they are the world leaders in yarn exports and account for around 20% of global yarn trade. Since the yarn export dropped substantially during the last two years, the spinning mills have huge export obligation commitments under the EPCG / advance licensing schemes which have to be honoured.?