India’s readymade garment exporters want a ban on cotton exports, saying they are facing a severe liquidity crisis because of soaring cotton and yarn prices, which is making it difficult for them to deliver shipments to their foreign buyers on time. Some foreign buyers have sought up to a 30 percent discount if goods are delayed over 15 days in time or asked for air transport at their own cost, which would wipe out profits for sellers, industry sources told. The industry wants a ban on cotton exports from India to check the rising prices. India had recently banned wheat exports following a sharp rally in local prices.
Textiles Minister Piyush Goyal has called a meeting on May 17 to discuss the rising prices of cotton and yarn. The industry will suggest a ban on exports to tide over the crisis. Cotton prices have risen by 40% in 2022, reaching an 11-year high due to a demand-supply mismatch. This is hurting the entire cotton value chain, including the yarn and cotton garment manufacturers. The price of a candy (335 kg) of cotton has breached the Rs 1 lakh mark in recent weeks, locking up funds in raw material that has created a liquidity crisis.
“Worst affected are the medium and small enterprises (MSME), which constitute more than 80 percent of the production base,” Lalit Thukral, President, Noida Apparel Export Cluster said. “Delivery of garments to the foreign buyers is being delayed.”
Thukral said countries like Bangladesh, Vietnam, and Thailand among others are importing cheap cotton from India and posing fierce competition to India in the global garments market, making a case for a ban on exports. India’s cotton exports rose to $9.9 bn in April-Feb FY22 compared with $6.3 bn in full FY21. In April 2022 exports were up 57.6 percent to $52.5 mn from a year ago.
Around 18 months ago, the knitwear units could buy one kilogram of yarn for Rs 200 whereas now the same money can buy only 400 gm of yarn, said Raja M Shanmugam, President, Tirupur Exporters’ Association (TEA). The association has also written to banks to seek help to tide over the financial crisis faced by the knitwear exporters.
The Tirupur garment-export cluster annually exports Rs 35,000 cr worth of knitwear garments. Knitwear exporters feel they would find the going difficult if the problem is not addressed immediately. India’s readymade garment exports were up 30 percent in FY22 to $15.9 bn in FY22 from $12.3 bn from a year ago.
