September 30, 2019
Fears of a slowdown loom large over India’s economy. For the spinning mills of South India, the issues are manifold – low domestic consumption, drop in exports and high price of raw materials. South Indian Mills Association (SIMA) Chairman Ashwin Chandran delves into various issues that the economy in general and the industry in particular face.
Over the last few months, there have been indications of low growth rate coupled with dip in domestic consumption that do not augur well for the economy. Some steps were being initiated and things could improve in the long run, Aswhin Chandran told The Covai Post. However, there is a need to prop up domestic consumption which can make a huge difference, he said and was hopeful of steps in this direction being taken.
Even as these issues remain, the textile sector has had to shoulder the burden of a few additional issues like drop in exports of yarn and fabric, high raw material price, etc., which have hampered it.
Yarn and fabric exports have been on a southern sojourn since April. Till July yarn exports had fallen by around 35-40 per cent and fabric by 20-25 per cent. Domestic consumption too has dropped, leaving too much supply in the market.
Besides, prices of raw materials – cotton, polyester and viscose – have been ruling higher than the overseas markets. In the case of cotton, the Minimum Support Price (MSP) is higher than the price ruling globally, he pointed out. Meanwhile, the domestic cotton season has ended and the new one is set to start in October-November.
In the case of polyester and viscose, it is higher owing to a series of protection duties, including the anti-dumping ones. This results in prices here ruling at least Rs 20-25 a kg higher than in the international market, putting the local industry at a disadvantage.
There has to be a slew of initiatives from the Government to make the industry competitive in the international market, says Ashwin.
There were a number of policies like duty drawbacks and export incentives that were, over the years, phased out as they were not WTO-compatible. On the new unified duty drawback scheme announced by the Finance Ministry recently, giving refund of duties for export products from 2020, he welcomed it as the government has said it is WTO-compliant. “We request the Government that it cover the entire supply chain from yarn to fabric. No one sector should be left out at the cost of another,” he said.
Differences in competitive prices are affecting exports. So the next step should be providing a level-playing field. He pointed to the case of cotton where the MSP is to protect the interests of the farmer. “This should be done. Most often farmers do not get the intended benefit. It is taken away by middlemen or traders. There should be a system in place where the benefit directly goes to the farmer though it would be no easy task. The Cotton Corporation of India, the body presently entrusted with the job, should buy from the farmer at the prevailing MSP and compulsorily sell it to the industry at the prevailing market price from month to month. Otherwise, the corporation will continue to be burdened with a huge stock of more than five lakh bales accumulated over the past. And without regular market operations, its cash flow will also be affected,” he said.
In the case of polyester and viscose, there are very few domestic players and duties have been imposed to protect their interests, which, Ashwin felt, was fair. But the same duties and levies are most often unfair to the industry. What is needed is their rationalisation to bring fibre prices closer to the international one, at least in the Asian region.
The world over, man-made fibre accounts for about two-thirds of textile consumption. Here it is 30 per cent and the rest is cotton. On the export of man-made fibre products, the country is not competitive and steps should be taken to change this trend, he felt.
On the other steps being taken by the Government now as part of its stimulus, he said that it would help in the long run. But initiatives to boost domestic consumption should run parallel to them.
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