The Tiruppur Yarn Manufacturers Association has called on garment-making units to back its campaign urging the Union government to redefine the functions of the Cotton Corporation of India (CCI).
Citing China’s model, the association noted that the China National Cotton Reserves Corporation holds over twelve months’ worth of cotton inventory, which helps keep cotton prices steady.
Along similar lines, it argued, the CCI ought not merely purchase cotton from growers at the Minimum Support Price (MSP), but should also build up reserves and cushion the textile sector against raw-material price volatility.
This position was set out in a representation submitted to the Apparel Export Promotion Council (AEPC) and the Tiruppur Exporters Association (TEA).
Representatives of the Tiruppur Yarn Manufacturers Association held discussions with AEPC chairman A. Sakthivel and TEA president K.M. Subramanian.
During the meeting, they flagged that numerous garment brands and buyers insist on sourcing cotton through particular ginners of their choosing, which restricts spinning mills’ access to financing.
Spinning units are consequently forced to pay upfront when purchasing cotton from these designated ginners. Yet, a large number of garment producers continue to take extended credit periods from the mills themselves.
This mismatch, the association said, has created a considerable strain on working capital across the sector.
Cotton costs make up somewhere between 65-70% of the expense of producing yarn, meaning yarn prices move largely in step with cotton prices.
A sharp climb in cotton rates roughly 30% domestically and around 50% on global markets, has fed directly into higher yarn prices.
That said, as international cotton values eased from 91.55 cents per pound to 82.17 cents, yarn prices likewise dipped, falling from Rs 384 to Rs 379 per kilogram.
Beyond pricing pressures, more than 70% of spinning mills have been unable to invest in modernisation, held back by weak demand for yarn exports.
India’s total spindle capacity stands at 45 million, of which upwards of 20 million spindles are now over a decade old. Without modernisation, the association warned, the country risks facing a shortfall in yarn supply down the line.
Against this backdrop, the yarn manufacturers’ body appealed to the garment sector for support in two areas: scrapping the 11% import duty currently levied on cotton, and pressing for changes to how the CCI operates.
“The association additionally urged garment manufacturers to settle dues with spinning mills promptly, in line with agreed credit terms,” The Hindu reported.
“We seek your cooperation in ensuring a more balanced payment mechanism, particularly in view of the prevailing financial pressures on the spinning sector,” the association stated.
Image courtesy: Cotton Brazil
