February 2020 Issue Apparel February 2020 issue | Page 108

INDUSTRY INSIGHTS
FACT-CHECK
Export of cotton yarn declined by 33 per cent
in the first quarter of 2019, as compared to
its export in 2018. Initially, back in 2013–14,
India used to export 120 million kilograms of
cotton yarn on an average. As per statistics, this
volume has reduced by half now. According to
K. Srinivasan, chairman, Texprocil, “Cotton yarn
is the only product that has not been granted
export benefits such as MEIS and three per cent
Interest Equalisation Scheme.”
According to a release by Texprocil, cotton
yarn also bears the incidence of the State
and Central taxes on inputs that are not being
rebated in the case of made-ups and garments.
This has an adverse effect on its competitiveness
in export markets.
With China having started to provide
duty-free access to Pakistan recently, the
demand for Indian cotton yarn has declined
considerably. However, the corrections on
yarn prices, owing to the acceptance of the
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February 2020
situation, also started from then on. According
to an ICRA study, cotton yarn realisations (for
the 30s carded yarn) averaged at R212 per
kg in July 2019, as compared to R225 per
kg in the April-June 2019 quarter. With India
exporting roughly one-third of its cotton yarn
production every year, trends in export demand
play a crucial role in determining the overall
performance of the domestic spinning sector.
As a result of a sharper fall in realisations
with respect to cotton prices, the spot as well
as rolling—which is adjusted for cotton stock-
holding—makes for a reducing contribution
margin of R88/kg and R84/kg in July 2019.
Owing to the price math and the bigger picture
that is hinting at a broader sense of improvement,
spinners can be hopeful that by creating a smaller
margin, they will be able to achieve some growth
and profit this year. Every Indian state should also
take the onus on themselves to bring about some
reform, which will further help the industry to
attain sturdier growth.