Increasing Cotton Yarn Price Creating Alarming Situation for Garment Exporters

Increasing cotton yarn prices is again becoming a big concern for the garment industry as cotton prices have gone up by 14 percent in the last two months, while that of cotton yarn rose a staggering 22 per cent. With the current rise, the benchmark Shankar 6 variety of cotton is quoted at Rs 10,940 a quintal. The widely-traded cotton yarn of 30’s count is now quoted at Rs 220 a kg, up from Rs 180 a kg two months ago. The significant increase in the prices has severely impacted planning in the garment sector. The cotton yarn rates had increased by Rs. 35 / kg in just one month up to March 24th, 2013. However, on April 1, an additional increase of Rs.15 per kg has been made by yarn producers by creating an artificial shortage (Rs 50 per kg increase in five weeks). The current cotton price per candy is around Rs. 37,000/-.

During Oct 2010, the same cotton prices prevailed, however, at that time, the price of cotton yarn for 40s count was Rs. 204 per kg, which has become Rs. 250/- per kg as on April 1, 2013, despite similar cotton prices. Order inflows from the domestic market are also supported by strong demand from China resulting in a continuous spurt in yarn prices.

Showing concern, Dr. A Sakthivel, Chairman AEPC has written a letter to Anand Sharma, the Union Minister for Commerce, Industry & Textiles, on the issue seeking timely intervention. “Whenever the demand in importing countries increase, apart from increasing of cotton prices in the domestic market, the cotton yarn prices are also hiked in the domestic market abnormally and on these occasions, there is no parity between cotton and cotton yarn prices. This ultimately affects the value-added segments including garment manufacturers who are finding it difficult to cope with this crisis and finalise export orders,” he says.

Rakesh Vaid, President of Garments Exporters Association, has also written to Zohra Chatterji, Textile Secretary, demanding the same as it is making it difficult for the exporters to fulfill their already booked orders and also in quoting prices for the next six months. The industry is asking that steps be taken, so that cotton yarn exports, except 60s count and above, should not be permitted and duty drawback on the exports of cotton yarn be stopped. Further, cotton yarn should be permitted to be imported duty free, as in the case of cotton, which is imported duty free, so that the prices of basic raw material for the manufacturing of garments remains stabilised. On the other hand, apparel manufacturers are considering increasing prices of their products by 10-15 percent in the next few weeks to get partial relief from rising raw material prices.