Led by the Confederation of Indian Textile Industry (Citi), spinning mills have decided to cut production by a third from May 24, 2011. However, to begin with, spinning mills will remain closed for a day on May 23, 2011. The short-sighted government policies with reference to both cotton and cotton yarn in the recent past have converted a profitable spinning industry into a crisis-ridden sector during the last few weeks.
The sagging demand for cotton yarn has forced mills for a production cut of 33.33 per cent (1/3rd) of the existing daily production. Textile mills are holding a stock of 500 million kg and this had completely eaten into their working capital. Faced with cash losses and negligible working capital, mills are finding it impossible to buy cotton and this has resulted in a decline in cotton prices in the market. However, the decline in cotton prices is no indication of adequate availability.
Leaders of various associations have sought several urgent steps to prevent the current crisis from deepening. Reinstatement of drawback facility on cotton yarn exports, withdrawal of excise duty of 10.30 per cent on garments, providing two per cent interest subvention for all textile and clothing products, and providing one year’s moratorium for repayment of loans to spinning mills, among other things need to be taken by the government.
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