Finance & Economy | News & Insights

HIGH RAW MATERIAL PRICES RESULTS IN REDUCED PRODUCTION.

Published: August 20, 2022
Author: DIGITAL MEDIA EXECUTIVE

The prices of raw materials have reached an all time high and as a result the textile mills and garment units have reduced their production. The soaring prices have made operations unviable for these units.

A.C. Eswaran, President, The South India Hosiery Manufacturers’ Association (SIHMA) said that garment units catering to the domestic market have brought down production by 50%. He further said, that lakhs of workers, working in Tirupur district have been affected by this.

According to the South India Spinners Association (SISPA), several textile mills in the Micro, Small and Medium-scale Enterprises (MSMEs) categories have shut down, either temporarily or permanently, as quality cotton is not available at affordable prices.

The spinning sector is incurring huge cash losses in day-to-day operations due to high cotton prices and low yarn prices. Cotton was sold at about ₹1 lakh a candy (355 kg) and it dropped to ₹82,000 a candy in July. It has risen to the ₹1 lakh level again. The hike of ₹18,000 a candy was within a short period. The mills are incurring cash loss of ₹40 to ₹50 a kg of yarn because of this volatility in cotton prices, said association president J. Selvan. Many mills may become non-performing assets (NPA), if the current situation continued, he said.

The associations said multinational companies (MNCs) should not be permitted to procure domestic cotton. Some MNC companies are purchasing more, and stocking up, said SIHMA. Export of cotton and yarn should be permitted only after meeting the domestic needs, it said. The SISPA presidentfurtherl added that cotton should be removed from the Multi Commodity Exchange platform and cotton exports should be permitted subject to its availability for the entire season.

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