Cotton spinning mills in northern India are planning to shut down one day a week. According to Chandigarh-based Northern India Textile Mills´ Association (NITMA) that has 98 member mills that includes leading names such as Vardhaman and Trident, etc., excess spinning capacity and decline in exports this fiscal year have resulted in poor cash flow and excessive stocks. In addition to these fiscal matters, textile policies in some southern states and those of Madhya Pradesh and Gujarat are hitting the northern spinning mills hard stated, Sharad Jaipuria, President of NITMA.
Jaipuria, added, ¨States like Madhya Pradesh, Gujarat, Maharashtra, Rajasthan, Andhra Pradesh and Telengana are attracting new investments in spinning due to their new Textile Policy, which is loaded with incentives and sops and thereby adding more than required capacity in the country. Tamil Nadu too is going to announce a new Textile Policy soon.¨
HS Cheema, Senior Vice President of NITMA, stated that the spinning sector is under crisis and plans like shutting the production one day in a week are under serious consideration.
According to G Balasubramanian, Secretary General of NITMA, India has about 10 per cent excess spinning capacity. According to him, ¨yarn exports have fallen by about 20 per cent year-on-year in the first quarter of this year.¨ More importantly, imports by China have declined by about 30-40 per cent this year creating a greater blow to the Indian spinning industry.
Additionally, to add to the woes of the textile mills, TUFS reimbursements are pending for cleared cases from the July-September 2014 quarter.
The government has also reduced allocation for TUFS from Rs 1,864 crore to Rs 1,520 crore in the 2015-16 budget. Cotton Corporation of India (CCI) started buying the cotton at MSP from farmers and procured a total of 8.6 million bales (1 bale = 170 kg) since October 2014.
Initially, they began by offloading cotton to textile mills at prices higher than international prices, but having received poor response from industry, they reduced the prices, since they are under pressure to offload the entire quantity procured this year, with new-season cotton arrivals just two months away. CCI sells to Central, Western and Southern India, from their godowns in the respective regions, whereas spinning mills in Northern India have to pay higher cotton transportation charges than their counterparts in these regions. This has in turn added to the cost of textile mills in Northern India.