MSME spinning mills in Tamil Nadu stop production and yarn sales

For the first time in the last 20 years, exports of yarn and textiles have declined by around 28 per cent.

In an emergency meeting of MSME Spinning Mills Associations’ held on July 12 at Coimbatore, a majority of stakeholders across Tamil Nadu participated. It was unanimously decided that from July 15, 2023, there will be a stoppage of production and sale of yarn due to heavy losses of spinning industry.

The spinning industry in Tamil Nadu has been facing unprecedented losses for several months. For the first time in the last 20 years, exports of yarn and textiles have declined by around 28 per cent. Today’s cotton price per candy (356 kg) is Rs 58,000. The price of 40’s yarn is Rs 235 per kg. Clean Cotton Cost is Rs 194 per kg. As per guidelines of South Indian Textile Research Association (SITRA), the minimum conversion cost of cotton to yarn should be Rs 2 per kg. In today’s situation, the conversion cost from Cotton to Yarn is only Rs 1. So Spinning Mills incur a loss of Rs 40 per kg. A mill having about 10,000 Spindles would produce 2,500 kg of yarn per day, which is incurring a loss of Rs 1,00,000 per day.

As the mills are forced to incur huge losses, unable to meet the expenses of bank loan repayment (principal and interest), cotton purchase payments, electricity bills, GST, ESI, PF, etc, the mills are at a standstill situation. If this situation continues, the spinning mills will soon become Non-Performing Assets (NPA) and the mills will be at risk  of permanent closure.

The main reasons for this crisis in spinning sector:-

• Due to 11 per cent import duty on cotton, the price of domestic cotton is 15 per cent higher. As a result, India has lost many international orders and unable to compete with neighbouring countries in the export of yarn, fabric and clothing.

• Over the past several months, banks’ interest rates have gradually increased from 7.5 per cent to  11 per cent. As a result, the cost of yarn production has increased from Rs 5 to Rs 6 per kg

• Tamil Nadu Generation and Distribution Corporation (TANGEDCO) increased Retail Tariff Petition for Low Tension Consumers (LT & LT-CT) and High Tension Consumers (HT), Multi Year Tariff (MYT) and tariff increased during peak hours (Time of the Day – TOD), the production cost of spinning mills has gone up by Rs 6 per kg.

• The Government of India has provided short-term loans under the Emergency Credit Line Guarantee Scheme (ECLGS) to revive and rehabilitate the industry. Entrepreneurs who availed this loan have used it to tide over the crisis and for payment of bank dues, Electricity Charges, labor wages, ESI, PF, etc. The repayments for the ECLGS loan started and this has become an additional burden on the Spinning Mills and this also increased the cost of production by Rs 5 per kg.

• There is unrestricted import of yarn and fabrics from countries like China, Vietnam and Bangladesh. Due to this, the Entire Textile Value Chain of the country has been greatly affected.

Appeal to Government Of India

• They requested the Government of India to immediately withdraw the 11 per cent import duty  imposed on cotton.

• We request the Government of India to immediately reduce the interest rates of the banks to the previous level of 7.5 per cent.

• We request that the outstanding short-term loan of ‘Emergency Credit Line Guarantee Scheme (ECLGS) be restructured and provide fresh ECLGS loan as given earlier. Provide six months holiday period and seven years repayment period at a lower rate of interest.

• Considering the slowdown in the spinning Industry, we request the government of India to extend the term loan by two years moratorium and restructure the existing term loan as given in the past. There should not be any stringent rules by Reserve Bank of India (RBI) in moratorium for spinning sector.

• In India, the capacity of spinning mills is already very high. The Government of India should immediately formulate a One Country – One policy for the textile industry. Further, no subsidy or concession should be encouraged by any State Government to increase the Spinning Capacity.

• The Government of India can take appropriate measures to promote the export of yarn and Fabrics and take steps to monitor and prevent the import of yarn and fabric.

• The Minimum Support Price (MSP) operation has to be extended to Cotton Yarn. The MSP has to be fixed at atleast Rs 2.25 Paisa per count per kg.

• From April 1, 2024 onwards, they requested that all types of fabrics manufactured in our country should print the precise weight on the fabric.

Appeal to Government of Tamil Nadu

• The Government of Tamil Nadu should immediately withdraw the Electricity Tariff hike made through Retail Tariff Petition 2022 by Tamil Nadu Generation and Distribution Corporation (TANGEDCO) for Low Tension Consumers (LT & LT-CT) and High Tension Consumers (HT).

• TANGEDCO increased the Electricity Tariff vide Multi Year Tariff (MYT) petition from July 1, 2023,  for Low Tension Consumers (LT & LT-CT) and High Tension Consumers (HT). We request the Government of Tamil Nadu should cancel the amendment immediately.

• TANGEDCO Peak Hour timing and Charges increased during peak hours vide Time of the Day (TOD) for Low Tension Consumers (LT & LT-CT) and High Tension Consumers (HT). We request the Tamil Nadu Government to change the Peak Hour from evening 6 PM to 10 PM as we have solar support during day time and also request not to use this mechanism to generate revenue.

• At present, TANGEDCO charging 90 per cent of Maximum Demand charges or Recorded demand, whichever is higher. So, considering the Extra Ordinary situation of the Spinning Industry, we request the Government of Tamil Nadu to direct the TANGEDCO to collect 20 per cent of Maximum Demand Charges or recorded demand.

• The Rooftop Solar Network Charges is being collected by TANGEDCO of Rs. 1.48 Ps for Low Tension Consumers (LT & LT-CT) and Rs. 0.96 Ps for High Tension Consumers (HT). We request the Government of Tamil Nadu to direct the TANGEDCO to abolish the Rooftop Solar Network Charges immediately.

• As the Spinning Industry is 24 hour electricity consuming industry, central and state governments should promote Green Energy and provide 15 per cent capital subsidy for it.