While the 3 month old Ukraine-Russia war has continued to its pressure on global commodity prices esp, impacting the import price for gas and petro fuels, here in India the cotton sector has been keeping its upward price north with Indian cotton having shot the `never see before` price of Rs 100,000 per candy [of 2 bales x170 Kg], according to the NUOVA- TEX GLOBAL TEXTILE OUTLOOK, June 2022 Issue.
The unstoppable price rise for Indian cottons has harmed the downstream value chain esp, for yarn spinners and eventual for garment and home textile exporters.
The Government in order to pacify the seriously impacted downstream lobby of yarn spinners and fabric manufacturers, woke up but too late to remove the 10% import duty on cottons. However, it was of no real benefit to the yarn spinning mills and or to downstream textile exporters considering that by this time the Import cot- tons were also peaking in the price. All this while, and till now, the Indian cottons continue to make hay while the sunshine and even peaked to the unseen price of Rs 105,000/candy, and leaving no option with the yarn buyers except to go for import of yarns from Vietnam whose landed price is coming to Rs 10 to 15/Kg for the counts.
The drastic Impact on downstream value adding textiles.
The rising and unstoppable price in increase of cottons has negatively impacted and harmed the downstream yarn and fabrics manufacturing, and has ultimately hit the garment exports making the Indian prices uncompetitive vis a vis rivals like Bangladesh, Vietnam and others in the North Africa rim. The loss to India textile exports is irreparable.
The first sign of serious pressure on the margins of spinning mills was recently demonstrated down via recent `stop the work ‘call in mid of May by South India Spinning Mills Association. They are of the view that yarn manufacturing at today’s cost of cottons, is no more working out viable to sustain the mill operations.
Is the low value export of Cotton and/or cotton yarns worth the value vis a vis finished fabrics and apparels value chain? The harm on the disruption of India s ex- port value chain is evident and strong now, with a large no of MSME apparel and fabric manufacturing units preferring to stop the production and/or manufactrure only for domestic and local markets.
The relief from new Cotton season is minimum 3-4 months away while the stocks of the current crop go on diminishing. Many of the small to medium yarn spinning mills have made foray into increased production of polyester and polyester blended yarns, which are in robust demand esp. from knitting and knitwear sectors. This has helped them manage the Working capital that been already robbed off by high cotton prices. This is a healthy long-term trend to control erratic cottons
It is suggested to work on Way Forward esp. towards,
- Monitoring accurately the cotton stock situation over next 3-4 months, as also the reasonably correct estimation of the new crop arrival from end 2022.
- to allow free and duty free continue import of both cottons a and cotton yarn to help stabilise the domestic prices and towards supporting export textiles competitiveness, and
- The Government to encourage and incentivise the increased use of MMF fibres, polyesters, and others in line with global preferences too.
