Good monsoon and a better crop size of cotton may help in keeping the price of cotton viable for the industry in the next few months, thereby increasing the profitability of cotton yarn spinning mills.
The spinning mills in India have good potential with the foreseeable surge in demand for cotton yarn in the export and domestic apparel and home furnishings sector.
According to a study conducted by Credit Analysis and Research Limited, the direct yarn exports are likely to touch an estimated 1,500 million kgs by FY14 from current 1,107 million kgs in FY13 from India. The demand for yarn would come from China, it says.
T Kannan, the Chairman of CII Textile Committee and Managing Director of Thiagarajar Mills Private Limited talking to Business Standard, said that the competitiveness of the Indian spinning mills as compared to major competitors - China, Pakistan and some South American Countries - has increased in the last two years.
They have better operational productivity in terms of machine and labour productivity. China hitherto was subsidising power and labour cost to the local spinning mills, which has been withdrawn in the last two years. So the fundamentals are playing in the favour of India.
In order to meet the increase in demand for cotton yarn, firms may have to indulge in fresh hiring to the tune of 12% to 14% of the present headcount.
According to S P Oswal, Chairman of Vardhman Textiles, Indian spinning mills are making merry as production of cotton yarn in China has slowed down. The cotton available to Chinese yarn makers is costlier by 10% as compared to their Indian counter-parts. Even after paying import duty on consignment brought from India they save about 5% of cost and that is substantial. Indian spinners can make hay till the Chinese Government makes an intervention.
The withdrawal of 'Focus Product Incentive Scheme' by Government of India, according to Oswal, did not make a dent on export earnings as the realisations had increased since last year.
The Secretary General of CITI (Confederation of Indian Textile Indusrty) D K Nair, however, is slightly apprehensive about the price of cotton. There has been an upward trend in cotton prices in the past few weeks and if it continues, it may mar the prospects of fruitful returns for the millers.
However, the President of All Gujarat Millers Asociation, Dilip Bhai Patel is of the view with the arrivals pick up, the fears of prices moving higher may soon subside.
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