As cotton prices shoot up to Rs. 5,800 a quintal, textile industry is reeling under severe pressure and facing scarcity of raw material.

With a not-so-favourable export market and the increasing cost of operations, the industry has decided to declare a two-day production holiday every week in protest. The industry has alleged large-scale hoarding by the multinational companies with deep pockets leading to the situation.

The industry demands increase of export incentive to 7 per cent from the present 3 per cent and offer finance at 7 per cent in order to make them survive and remain competitive in the international markets. If it fails to be competitive globally, the industry worries that the commodity will have to be sold domestically, triggering a glut. This could lead to huge losses for the industry and drop in cotton prices in the ensuing season.

“The situation is virtually the same in all the textile industry hubs in the country. Gujarat might be a little better off but the situation in Telangana, Andhra Pradesh and Tamil Nadu is quite bleak. MNCs have stepped in to buy large quantities of the commodity and hoarded it,” RK Agarwal, Chairman of the Telangana Spinning and Textile Mills Association, has said.

“Our cost of finance is at about 14 per cent, while the MNCs get it at far lower levels. This is putting us in a disadvantageous position. We have decided to stop production for two days in a week in a protest and also to reduce losses,” Maddi Anantha Reddy, General Secretary of the Association, told after the meeting of the executive committee that discussed the worsening situation.

The Indian textile industry is second largest globally after China with 49.17 million spindles, is facing a tough challenge from China and Pakistan.

“Mills have been suffering from inadequate working capital and now have been virtually pushed to a corner with raw material becoming scarce due to artificial shortage created by foreign traders,” he said.

The industry wanted the Cotton Corporation of India (CCI) to ensure stabilisation of price rather than inflate the prices. It wanted the Union Government to set up a Cotton Price Stabilisation Fund Scheme, providing working capital at 7 per cent rate interest rate and reduce margin money (contribution of a borrower in the total project cost) from 25 per cent to 10 per cent.

The association also asked the government to provide 3 per cent incentive for yarn, 5 per cent for fabric and 7 per cent for garments.

Source: Business Line