Sunday, June 22, 2008

Looming Crisis of Powerlooms

Powerloom: When clatter and clang came to a standstill

As powerloom weavers of Maharashtra observed state-wide bandh (on June 16) called by Indian Powerloom Federation and Maharashtra Powerloom Federation over escalating yarn prices and dwindling prices of grey-cloth, a question must be posed: who must be blamed for this textile crisis which is threatening the 19 lakh strong powerloom industry for the past two months?

Should we blame the local trader who very often resorts to black marketing and hoarding in order to artificially raise the yarn prices? Or should the blame be passed on to the spinning mill owners who are well aware of the art of market manipulation?The above two questions very often determine the fate of the weavers but this time the real reason behind the ongoing recession lay somewhere else. The crisis is wrapped in two words: cotton export.

According to Cotton Advisory Board (a government body under the Central Textile Ministry) the cotton export for the year 2007-2008 is 8.5 million bales, (one cotton bale consists of 170 kgs) out of which 60% has gone to China alone!

India's cotton-based textile industry had been doing extremely well during the year 2003 to 2007, due to the adequate availability of good quality home grown cotton. But during the year 2007-08, apart from various other factors like sudden appreciation of rupee against US dollar, escalation in bank interest rate, slump in the local and export markets, the abnormal cotton price has totally paralysed the performance of the textile industry and in this scenario, even the top ticket mills are incurring huge losses.

If Shri J.Thulasidharan, Deputy Chairman of SIMA (The Southern India Mills' Association) is to be believed government of India did not take necessary steps to control the unabated export of the cotton. He has gone on record to say that many multi national cotton traders, unlike previous year, have entered into the Indian market and dominated the cotton purchases from the beginning of this season. He has warned that if the present trend continues, the spinning mills would be closed soon.

The one cotton candy (which consists of 356 kgs) is normally priced at Rs. 19,000 but this year because of scarcity of the cotton it is being sold at Rs. 25,000 per candy, an increase of more than 35%.

Even CITI (Confederation of Indian Textiles Industry) chairman PD Patodia has warned that "unchecked cotton exports is not healthy for domestic firms. The government has to give heed to industry's concern."

The textiles industry has already asked to put a curb on cotton exports in order to keep a check on prices but the government is in no mood to listen. In an interview given to Reuters on May 8, Union Textile Minister Shankar Singh Vaghela was ecstatic about cotton production. "If the monsoons are good", he said, "We may see production of 35 million bales in 2008-2009." He did not speak a single word about escalating cotton export, which is having a disastrous impact on the powerloom weavers across the country. Interestingly, it is not the farmers who are making money out of the cotton exports but the intermediaries.

Steep cotton prices directly affect yarn prices. And a steep yarn price means an increase in the cost of production of grey-clothes.

Before 2003, when the excise was imposed on powerloom industry, weavers did not know the terminology of loss. With the implementation of free quote trade from January 1, 2005, plain shuttle powerloom products are facing a stiff competition.

In such a scenario, what the powerloom weavers of Maharashtra should do? Blaming the local trader or baniya will not serve the purpose. Market does not always dance to a Baniya or Marwari's tunes; it functions on an economic term called market forces. Our government needs an effective regulation to curb the undue cotton export to the foreign countries. Government must ensure that the cotton is supplied in the domestic market first. Foreign players, offering lucrative prices, must wait in a queue.It is only by altering the government's policy towards the cotton export; weavers can overcome the present crisis of the power loom industry. Are they ready to compel the government to change its policy?

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