jalgaon :- Govt mulls ways to rein in spiralling yarn prices

After failing to control cotton prices, the Central government now wants check yarn prices. Measures under consideration include introducing a new tariff line for yarn and imposing a count-wise duty on exported yarn. The Group of Ministers constituted for cotton and yarn is expected to take a decision this week, said an official in the ministry of textiles. “We will also collect count-wise yarn export data to find out whether the problem is limited to the finer counts or is more general,” he added.

Yarn prices have increased by `14 per kg in the last 25 days, putting it beyond the reach of small and tiny weavers and raising the spectre of job losses. But yarn manufacturers say curbs on exports is no solution as it is the result of expensive cotton. “When the raw material cost is increasing, how can prices come down? The government can artificially suppress yarn prices but till when? With huge yarn manufacturing capacity, we expect to have a surplus of 650 million kg of yarn after catering to the domestic market,” said SP Oswal, chairman of Ludhiana-based Vardhman group.

On Monday, Shankar-6, the widely-used Indian cotton variety was being quoted at `43,000 per candy at the spot market in Ahmedabad, compared to `22,000 per candy during the same period last year.

Due to a fast rise in production, there is ample yarn supply. “There is no shortage of cotton yarn in the country. The spinning industry is producing more. In the last three years alone, three million spindle capacity has been added in India,” said Confederation of Indian Textiles Industry & Textile Export Promotion Council (Texprocil) ex-chairman and Mumbai-based GTN Textiles chairman BK Patodia.

Statistics with the Office of Textile Commissioner in Mumbai show the country produced 2,948 million kg of cotton yarn in 2007-08 and exported 22% of it. In 2009-10, the country produced 3,073 million kg of cotton yarn and exported 19% of it. This year, production is estimated at 3,400 million kg and only 20% is likely to get exported. While makers of finer count cotton yarn are importing fine Egyptian cotton, others have shifted from producing coarser counts to finer counts with Indian cotton. “It is costlier and more time-consuming to produce 40’s count cotton compared to 20’s count. But it helps us to run the mill longer with less raw materials and so we are shifting to finer counts,” said P Natraj, managing director of Coimbatore-based `800-crore KPR Mills.

The company has 2.12-lakh spindle capacity and sells 75% of the yarn it produces to Tirupur exporters. Till now, finer counts made up only a third of its total output. But it is planning to increase this ratio.

“We are ready to supply cotton yarn to domestic fabric and garment manufacturers. But they are asking us to reduce prices, which is highly impossible in the days of rising cotton prices,” said a Tirupur-based spinner who supplies mainly to hosiery units.

Cotton prices are expected to increase in the coming days with mills and exporters starting purchases. Arrivals are in full swing in Maharashtra after Dusserha. The Dharangaon APMC in Jalgaon district is getting 10,000 quintals daily. The average price of cotton was `4000/quintal in the Darangaon APMC. Ginners as well as exporters are buying from the mandis in north Maharashtra region that sows cotton early. Arrival of Vidarbha cotton begins after a week. Exporters want to take a conservative approach to minimise losses due to the volatility in the international market. “The international cotton market is very volatile at this moment. Cotton prices in the international market have gone up by 25% during past two weeks and increased by 50% since August,” said Rohan Shah, partner of the Mumbai-based cotton export company, Bhaidas Cursondas & Co.

The newly-formed All India Cotton Ginners Association in its first meeting with the Union Commerce Ministry on Sunday highlighted chances of a likely shortage created by exports. “We might not be able to fulfill contracts,” said director Bhagwan Bansal.

(inputs from Jayashree Bhosale)

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