North’s cotton spinning mills in slow lane

Vijay C Roy

Tribune News Service                     

Chandigarh, August 19

After automakers and auto ancillaries, cotton spinning mills in North have resorted to production cut as they are grappling with the twin challenges of weak export demand and uncompetitive prices. While a few mills have stopped production, some are reducing the number of working days and shifts. On an average, the production is down by 25-30%.

With an installed capacity of 750 lakh spindles, the northern region contributes 15% to the total capacity of the country. The region comprising Punjab, Haryana, Uttar Pradesh, Rajasthan and Himachal Pradesh has around 200 spinning units.

“Perturbed over the dwindling demand, mills have started curtailing production for the last 2-3 weeks. On an average, spinning mills in North have reduced working days from seven days a week to five or six days per week and some of them have cut the number of shifts from three to two or one shift,” said a senior official in Northern India Textile Mills' Association (NITMA).

According to the industry, the Indian cotton is almost 25% costlier in domestic market than the international price. This has made Indian yarn manufacturers uncompetitive in the international markets.

According to research agency ICRA, India’s cotton yarn exports declined by 33% Y-o-Y in Q1 FY2020 (41% in May and June 2019) and stood at a seven-year low of 59 million kg in June 2019.

As a result, multiple textile associations across the country have reported stock pile-ups and production cuts by spinning mills.

“The annual consumption of the spinning mills in North is 80 lakh bales (1 bale=170 kg). On an average, the spinning mills are incurring a loss of Rs 15 per kg and if timely action is taken, they will be forced to shut down, thereby affecting the ginners who are already passing through hard times,” said Punjab Cotton Factories and Ginners Association president Bhagwan Bansal.

China has been the largest market for Indian yarn. As compared to a 50% Y-o-Y decline in cotton yarn exports to China, which used to be the largest buyer of cotton yarn, during Q1 FY2020, exports to other markets too declined by 20%.

“Besides uncompetitive cotton prices, other factors which have been affecting cotton yarn exports from India include duty-free access provided by China to Pakistan from July 2019 onwards, continuing competitive pressures from nations such as Vietnam. In addition, imposition of tariffs by the US on garment exports from China is affecting China’s apparel exports, resulting in slowing down of demand for cotton yarn,” said Jayanta Roy, senior vice-president and group head, Corporate Sector Ratings, ICRA.

Vital Statistics 

• Cotton spinning mills in North: Around 200
• Installed spindle capacity: 750 lakh
• Annual consumption of cotton: 80 lakh bales (1 bale=170 kg)