Since the pandemic struck the world, the biggest news from the yarn industry has been the rising prices, which has created a major havoc in the textile value chain, disrupting price calculations and order commitments. Players share that the situation will settle down only when market conditions improve. The difficulties that have arisen are many, but the industry feels that the Government could have been more proactive to support the industry.
The yarn industry at large believes that the last 15 months have been one of the toughest in the history of the industry. “Last year as the channel was empty, the demand was higher than the supply resulting in pushing of prices, but now with the domestic Indian situation very grim, the demand has gone down and the market has softened. Currently, there has been more of strategic selling in the form of increasing sales to strategic markets/customers. However, it is difficult to stick to a particular pricing and selling strategy in these times and there is a need to continuously revisit the same to stay in market,” shares Amit Jain, Chief Manager, Central Marketing Yarn, Vardhman Textiles.
However, many in the textile sector believe that yarn prices have always been pushed far below their actual market rate and the increase is only a reflection of the suppression. “Spinning mills have incurred huge losses in past and have always been a stressed asset but no one ever discussed about low yarn prices and profitability. We also need to see that there is an increase in input costs be it of power, paper (packing), petrol (transportation cost), manpower and everything impacts prices as well as profitability. Because of the nationwide lockdown, spinning mills had to cut their production capacities for more than a quarter in last financial year and the price surge seen in October 2020 onwards was mainly because of less supply and pent-up demand. Now with the second wave of Covid, retail has been again getting impacted and we can see the yarn prices again getting soft by about 10 per cent from the peak levels,” emphasises Saket Jaipuria, Executive Director, Ginni Filaments.
The fluctuations in yarn prices are expected to continue for some more time, as the demand continues to increase in the world market, a strong anti-China origin cotton movement picks up pace and the price and demand of raw cotton also rises. In fact, some predict that 2021 could actually be more difficult for the industry than 2020!
Role of Government…
The industry firmly believes that the Government can do much more to support the industry. Highlighting the same, Riju Jhunjhunwala, Chairman & Managing Director, RSWM Limited, says, “Skilled manpower, raw material and globally competitive rates are something that we miss. Additionally, the effect of GST on the unorganised sector is still not complete. But the immediate need of the hour is to put synthetic textiles at par with cotton in the GST chain. They can also fix the pricing catalogue, for the imported raw material. Export incentives will greatly help in taking business away from China.”
Rajesh Mittal, Director, Cedaar Textile Private Limited is very vocal on the subject and feels that if as a country we want to make our presence as world leader in textile, we need to follow China – how they have developed different industrial zones by providing land at very nominal price, loan with subsidised interest , subsidy in power, transportation and wages to new industry – for at least 10 years so that industry can build up infrastructure to make a stand in the world and compete with China, also local industry should be given more incentives to make ‘Made in India’ a reality and Government should compare all prospects of China model which they provide to have exponential growth.
The think tank at Vardhman feels that the Government can support the trade by taking the following three measures:
- Monitoring and regulating the ocean freights and inland transportation costs so that we remain competitive in international market
- Passing on more export benefits and subsidies in the form of better RODTEP scheme rates on textile products
- Entering into Free Trade Agreements with more countries around the globe to make exports more viable.
Amit, reflecting the thoughts of most of the players, adds that economic crisis is evident but Government, as also the industry is taking initiatives to improve the situation. Vaccination and a reinforced medical infrastructure, is a ray of hope. “Altogether, we are optimistic that the world will combat the pandemic and come out stronger. However, in light of the current situation in India, we foresee that the domestic market in coming weeks might remain under lockdowns which will have a negative impact on domestic yarn sales. Spinning industry would have to face acute labour shortage thereby impacting the supply and logistics chain. The reliance on export of yarn will increase as experienced during this period in previous year,” concludes Amit Jain.