Spinning mills in Gujarat are facing bleak days due to falling demand from international markets and high cotton prices. Exports of cotton yarn declined by 46 percent, this October, to $719 million, from $1.33 billion last October, according to the Union ministry of commerce and industry.
There are 600 spinning mills in Gujarat with an installed capacity of 45 lakh spindles. These mills are currently incurring losses of Rs 15 per kg. At least 60 percent of the cotton yarn produced in Gujarat is exported. With the price of cotton hitting Rs 69,000 a candy, spinning mills here are unable to compete in international markets.
While global cotton prices fell by 17 percent between April and August this year in anticipation of higher cotton production, domestic prices rose by 2 percent because of limited supply, according to a report by CRISIL. Expensive domestic cotton hurt India’s competitiveness, leading to export market share being lost to China and Bangladesh.
Due to the high prices of cotton, yarn makers have reduced production and procurement of cotton. Combed yarn is barely being manufactured with carded yarn increasingly spun, as it uses 10 percent less cotton. Moreover, with high prices, spinners are only procuring as much cotton as they need, and this is affecting profitability.
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