Higher exports boost cotton yarn spinners’ profitability

The surge in the demand for cotton yarn in the export market and domestic apparel and home furnishing sector, has renewed vigour and confidence of Indian spinning mills this year. On the back of higher exports, the spinners’ profitability is increasing while many of them are raising headcounts to full fill increased order flow.

The good monsoon and a better cotton crop may help keeping the price of cotton viable for the industry in the next few months, thus increasing the margins of mills.

According to Credit Analysis and Research Limited, the direct yarn exports are likely to touch an estimated 1,500 million kgs in FY14 from current 1,107 million kgs in FY13 from India. The demand for yarn would trigger from China, it said.

Government’s decision of making export of cotton yarn eligible for benefits under Incremental Export Incentivisation Scheme for the entire financial year 2013-14 will also incentivize higher exports.

According to T Kannan, the chairman of CII Textile Committee and managing director of Thiagarajar Mills, competitiveness of the India spinning mills as compared to major competitors – China, Pakistan and some South American Countries has increased in the past two years. The revival of export incentivasation scheme that would provide 2% benefit on incremental exports would also help boost exports, he added.

He further added that in order to meet increased demand for cotton yarn in domestic and export market, companies may have to indulge in adding 12% to 14% to their present headcount.

According to S P Oswal, chairman of Vardhman Textiles, Indian spinners are making merry as production of cotton yarn in China has slowed down. The cotton available to yarn makers in China 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.
D K Nair, Secretary General of Confederation of Indian Textile Indusrtry is slightly apprehensive about the price of cotton. There is has been an upward trend in cotton in the past few weeks and if it continues, it may impede prospects of lucrative returns for the millers, he believes.