Cotton Yarn Exports Likely To Drop By 20% In The Current Fiscal

07-Oct-2013

Cotton yarn exports from India, which has touched 120 million kg per month, is likely to drop by 20% in the current fiscal following the UPA government's sudden decision to remove the exports benefits under focus market scheme (FMS) on cotton yarn. FMS is aimed at developing new markets across the globe for Indian products.



Till date, Latin America and Africa were the focused markets for Indian cotton yarn exports. The move will also affect the spinning mills in Tamil Nadu, Andhra Pradesh, Kerala, Karnataka, Punjab and Haryana as this will create an excess capacity of yarn in the country and affect the trade in the second half of current fiscal. Talking to ET, T Rajkumar, chairman, Southern India Mills' Association (SIMA) said "We produce 330 million kg of yarn per month. Of this 200 million kg is used in the domestic market and rest is exported. China and Bangladesh accounts for 65% of the country's total yarn exports. But exports to new markets that we were developing for cotton yarn will take a beating due to the removal of FMS. Nearly 20% of the exported volume goes to these focused markets." Moreover, competitors of Indian yarns will take advantage of the current situation and will increase their exposure in these emerging markets.



SP Oswal, chairman, Vardhman Mills said "We will have to face stiff competition from Indonesia, Thailand and Turkey in the world market." "Last year, there was good demand of coarse cotton yarn from China which earned good revenues for the textile sector. This year we are not sure whether to get such demand from China," said Rajkumar. He also added that cotton yarn prices have not kept pace with cotton prices.



In the first week of October last year, price of a candy of cotton (Sankar 6 variety) was 32,900 and the price of a kg of cotton yarn was 228. But this year cotton prices have climbed to 48,500 a candy and the cotton yarn prices is hovering around 256 a kg.



Prem Malik, chairman, Confederation of Indian Textile Industry (CITI) said "The production of cotton yarn has gone up, but the domestic demand has not kept pace with the increasing production. There has been a decline in cotton yarn prices in the domestic market in recent weeks." India is the most competitive yarn producer in the world at present and therefore there is increasing export opportunities opening up for our cotton yarn, Malik said.



Referring to the urgent need to bridge the Capital Account Deficit (CAD), the CITI chairman said that textile products, including cotton yarn, have increasing demand in overseas markets and it will be logical to encourage export of cotton yarn from the point of view of bridging the CAD, in addition to creating additional employment.

Source:- articles.economictimes.indiatimes.com