It is a double whammy for the textile industryas the prices of cotton have firmed up on the one hand and the cost of dyes and chemicals has also gone up substantially on the other hand. The increase in prices of these key raw materials used in textiles manufacturing has pushed up the input cost of textile mills and processors. This will pinch the industry and dent its profit margins, say industry experts.
“Cotton prices have increased by 20% whereas the cost of reactive dyes has almost doubled. The price of caustic lye has also increased by 40% and even coal prices have increased by 60%,” said Naresh Sharma, vice-president, Ahmedabad Textile Processors Association. Costlier raw materials have led to an increase in input costs. “Our input costs have increased significantly and unfortunately, we cannot pass it on to our customers as the market demand is low. Increasing the costs would only mean losing out on business,” said Dhruv Patel, managing director of a city-based textile mill.
Echoing a similar view, Bhavin Parikh, CEO of a city-based textile manufacturing company, said, “Consumer confidence is overall down due to several reasons and thus, we will have to absorb the costs. This will dent our profits to a great extent. The same price competitiveness also hurts us in the global market; we might only be able to pass on a part of the cost to our clients.”
Higher imports of dyes raw materials by China from India has resulted in dyes prices in the domestic market surging by 30% in the last two months.
The price of Shankar-6 variety of cotton has currently settled at Rs 47,500 per candy (one candy is 356kg) after touching a six-year high of Rs 48,500 per candy this week. “The carry-over stock for 2018-19 is low both domestically and internationally. The price could firm up further if the US-China trade war continues. Based on the current scenario, the cotton prices may remain 15-17% higher in 2018-19,” said Arun Dalal, a city-based cotton trader.
He, however, also made it clear that the price trend would largely be dependent on cotton sowing and progress of monsoon in months to come.
Industry experts said that the government must intervene in the matter. “Even as cotton prices are up, they are in tandem with the global prices. This, together with an increase in prices of chemicals and dye due to a shut-down in Chinese production houses as well as crude oil price hike, will certainly have an adverse impact and the government must intervene,” said Sanjay Jain, chairman, Confederation of Indian Textile Industry (CITI).