Help spinning industry offset losses: Tamil Nadu Chief Minister Stalin tells PM Modi

With spinning mills in Tamil Nadu downing their shutters due to heavy losses owing to steep increase in cotton price and yarn, Chief Minister M K Stalin on Wednesday shot off a letter to Prime Minister Narendra Modi demanding a slew of measures, including restructuring of ECLGS, to provide respite to the labour-intensive industry.

The spinning industry in Tamil Nadu stopped production and sale of yarn on July 15 saying it is not able to run the mills due to the ever-increasing price of cotton and yarn. The industry is suffering an unprecedented financial stress mainly due to the prolonged Russian-Ukraine war, high inflation, and slow-down in the global economy.

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According to Southern India Mills Association (SIMA), cumulative impacts are a 18 per cent drop in total exports, 50 per cent drop in yarn exports, and 23 per cent drop in cotton textiles exports when compared to the previous year. While a kilo of 40’s yarn costs Rs 235, the cost of clean cotton is Rs 194 per kg.

In the letter, Stalin underlined the importance of the industry which employs about 15 lakh people as it is the engine of the industrial economy of the state.

“The combination of high cotton prices, increased operational costs, including bank interest rates and poor demand in domestic and international markets, has plunged the sector into such a severe crisis that the spinning mill association declared a production stoppage from July 15,” the Chief Minister told the Prime Minister.

He said the Union Government should provide financial support for MSMEs in the textile sector by restructuring the existing loans under ECLGS, extending the moratorium by one more year, and converting them into six-year term loans.

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While pushing for disbursement of fresh loans under ECLGS by reducing the regular banking interest rate, the Chief Minister also demanded that the Centre withdraw 11 per cent import levy on cotton as it will reduce the production cost significantly.

“Consider a ban on the export of waste cotton from India temporarily to tide over the shortage of waste cotton being faced by the Open-End spinners who fall under the micro-enterprises category but contribute to 35 percent of the yarn production of the country primarily used in low-end fabrics,” Stalin said.

The industry has been suffering since last year when prices of cotton and yarn hit a 11-year high. The price increase has also hit knitwear exporters who feel they are at the receiving end as the price of each garment is fixed at the time of signing the agreement.

Exporters believe the consistent increase in the prices of raw materials have forced them to lose to their competitors from countries like Sri Lanka and Bangladesh who enjoy duty-free access to European Union (EU) and US – the main buyers of garments, while garments from India attract a 9 per cent entry tax.