Apparel Online India Magazine August 1st Issue 2018 | Page 8

MIND TREE
Q-and-A
Recently the Central Government announced 28 per cent ‘historical’ increase in minimum support
price (MSP) of cotton. Already increased yarn and fabric price is a major issue for Indian exporters,
and trade bodies are of the opinion that this hike will have an ‘adverse’ impact on the industry.
Being an apparel manufacturer or stakeholder of the textile industry, how do you see this hike?
How will this decision impact you, and is there any way out of this impact…?
Pranav Ghelani, MD,
Sumangalam Exports,
Mumbai
The Government’s decision
to increase the MSP of cotton
will have an adverse effect
on the textiles industry. Given
this increase, the acreage for
cotton cultivation will go up and
consequently the supply. At the
same time, China continues
to be the largest importer of
cotton and this will not allow
the prices to stabilise. If the
US-China trade war extends to
cotton and textiles, American
cotton will be levied with
punitive tariffs by China. This will
also lead to upward pressure on
Indian cotton.
Given these factors, I see
cotton yarn prices going up
by around 7 per cent in the
new season. This will further
erode the competitiveness
of Indian textiles, but at the
same time higher cotton prices
will be the ‘new normal’ and
buyers around the world would
have to bear this in mind
while negotiating prices in the
upcoming seasons.
Rajiv Sharma, GM
– Marketing, Aarti
International, Ludhiana
The 28 per cent increase in MSP
by the Government has created
a big imbalance for the Indian
spinning industry compared
to the spinning industry in the
rest of the world. Due to this
decision, Cotton Corporation
of India (CCI) will have to buy
and hold substantial amount
of cotton and due to one big
party holding a major part of
the stock, other big traders can
easily manipulate the market
inconvenience with CCI which
may affect the spinning industry
in a big way. This will also create
a big hassle to buy cotton
from CCI due to their complex
system.
However, we understand that
due to coming election in
2019, the Government wants
to support farmers, but it can
be done in another way also
by giving direct subsidy to the
farmers based on their field size/
acreage as China Government
is doing. The other way will help
the farmers get direct benefit
and at the same time, the
spinning industry will also have
an opportunity to buy cotton
from the open market at market
price. Needless to mention
that China Government was
also buying cotton the same
way in the past, but after a few
years, they found this system
unviable and shifted to direct
subsidy system since the past
two years which is working
well. The industry needs to
give the presentation to the
Indian Government at different
platforms for having direct
subsidy system to the farmers so
that Indian spinning mills have
the opportunity to buy cotton
from the open market at the
market price and can compete
8 Apparel Online India | AUGUST 1-15, 2018 | www.apparelresources.com
with other spinning mills in
the world.
Prabhu Damodharan,
Convener, Indian
Texpreneurs Federation,
Coimbatore
Last year, during the starting of
the cotton season, the price of
cotton was Rs. 38,500 per candy
which increased naturally in the
next season. But I feel that the
global market will foresee this
change as prices being on the
increasing mode. So, across the
globe, all stakeholders have to
pay a little more. About its exact
impact at the various levels, it is
too early to say anything. I must
say that India needs to improve
the image of its cotton at the
global level. Indian cotton is
one of the best cotton but
due to some reasons as the
aforementioned ones, its image
is not good enough. We are
working in this direction through
our collective effort.
Vikram Jit Singh, MD,
Fiori Creations, Faridabad
The overall impact of MSP’s
rise depends on many things,
like the amount of cotton
production that will happen
next season, the amount of
export that will take place,
the availability of cotton in
India, etc. Among the various
stakeholders, who will bear
how much will also depend
on the situation at that time.
But one thing is for sure that
if there will be any rise in
fabric price, that will be for
the entire industry and the
industry together will try to find
a way out of this. Hopefully,
some part of increased price
will be observed by farmers,
mill sector as well as garment
manufacturers like us. If
required, we will also try to
convince the buyers about the
same.
BN Monnappa, MD,
Cotton World, Bangalore
This historical increase in MSP
definitely shows the policy
vision of our Government, but
from last few years, overall
policies are so frequently
changing that we can’t think
about long-term, can’t plan
properly and are forced to
face losses. Like recently when
duty drawback rates were
reduced, we faced its huge
negative impact and just
survived anyhow. So, whatever
the stage or process the
textile industry is in, right from
cotton production to cotton
price to apparel export, the
Government should have a
proper long-term planning with
regard to policy formation.
I would like to give another
example of the MGNREGA
scheme due to which the
industry faced labour shortage.
The Government did not