Indicating a major rise in garment prices, both in the domestic and international markets, apparel exporters have sought the government’s intervention to control a sudden spurt in the prices of cotton and cotton yarn in the past two months.
Like onion, the prices of these raw materials used by apparel makers have skyrocketed making their operations unviable. And any price hike of the finished products at the retail end could kill demand, say apparel exporters.
Cotton yarn prices in India have gone up by over 40 per cent in the last 45 days from Rs 45,000 a tonne to Rs 60,000 a tonne due to hoarding by speculators. This has created an artificial shortage in the market. "We need raw material security for the growth of this sector. Raw material prices have gone out of hand and it would affect employment and export targets. We don’t want a blanket ban on cotton yarn exports but the government must devise some mechanism to control the abnormal price rise," said Premal Udani, chairman, Apparel Export Promotion Council (AEPC).
Looking for the right cut
Getting out of control
- Apparel exporters have sought the government’s intervention to curb a spurt in the prices of cotton and cotton yarn in the past two months
- Cotton yarn prices in India have gone up by as much as 40 per cent in the last 45 days from Rs 45,000 a tonne to Rs 60,000 a tonne due to hoarding by the speculators. This has further led to an artificial shortage of the staple fibre in the market
- Centre must continue the cap of 720 mn kg on export of cotton yarn till next season
- Govt must remove import duty on cotton yarn alongwith a realistic drawback rate for the garment sector & a special incentive package to achieve an export target of $11 bn for fin yr 2011 & 10% growth thereafter
- Govt must expand the textile upgradation fund scheme for the benefit for a large number of players in the sector
AEPC is the apex body of around 8,800 apparel makers in India who collectively exported garments and made ups worth $10.5 billion last year. Over 12 million people are directly and indirectly employed by this sector.
"Due to a recent move by the Centre to cap cotton yarn exports, apparel exports in the month of December surged to over $1 billion, indicating the revival of the sector. But the sudden rise in cotton and yarn prices has put up new challenges," Udani said. Exporters said that the domestic garment retail market is also bearing the brunt of this price rise and sales are fast depleting due to the rise in input costs. "If raw material prices are not controlled urgently, garment prices in shopfloors would go up in the next few months and this would affect the common man.
Besides, we will also fail to grab growing opportunities in apparel exports as some of the business from China is expected to shift to India due to a rise in labour cost there," said Udani.
He said even if 10 per cent of China’s $115 billion apparel export business shifts to India, it would double India’s export volumes. So, in the larger interests of the country the government must prevent massive import of cotton and cotton yarn to China by Indian traders at the cost of the domestic industry.
It has asked the Centre to continue the existing cap of 720 million kg on export of cotton yarn till the next cotton season as well as to remove import duty on cotton yarn. It has urged the government for a realistic drawback rate for the garment sector and a special incentive package from the commerce ministry to achieve the export target of $11 billion for financial year 2011 and 10 per cent growth thereafter.
AEPC has also asked the Centre to expand the textile upgradation fund scheme for the benefit for a large number of players in the sector as well as to route the funds under rural employment guarantee scheme via the sector to provide gainful training and employment to unskilled labourers in rural India.