MSP hike, demonetisation, GST compounded crisis in textile industry: Mills’ association VP

10 September 2019
RISHI KOCHHAR FOR THE CARAVAN
RISHI KOCHHAR FOR THE CARAVAN

Mukesh Tyagi is a senior vice president of the Northern India Textile Mills’ Association, or NITMA, an organisation that works as a link between small, medium and large textile industries and the government. According to NITMA, its members have a “combined turnover above Rs 50,000 crore.” On 20 August, the Indian Express carried an advertisement by NITMA that was titled “Indian Spinning Industry Facing Biggest Crisis, Resulting in Huge Job Losses.”

The advertisement said that an ongoing crisis had resulted in the “closure of approximately one third of spinning capacity across India,” and added that textile mills are “incurring huge cash losses.” It also said the industry would not be able to buy the upcoming cotton crop of about forty million bales worth Rs 80,000 crore. The association put out data which showed that the export of cotton yarn between April and June this year was 35 percent lower than last year’s exports for the same period. The advertisement added, “The Indian textile industry employing over 100 million directly and indirectly hereby seeks immediate attention of Government of India to prevent job losses and avoid the spinning industry from becoming Non Performing Assets.”

On 27 August, Sagar, a staff writer at The Caravan, spoke to Tyagi at his residence in Delhi. Tyagi explained what led to the crisis in the Indian textile industry and discussed what measures the industry would like to see from the government. “One of the reasons for [the liquidity crisis] was demonetisation,” Tyagi said. “When it happened, the [cash flow] that was there in the textile market was disrupted.”

Sagar: Could you explain the crisis in the textile industry that you highlighted through the newspaper advertisement?
Mukesh Tyagi: The first thing that comes in is the problem related to [the procurement of] raw material. The main raw material of our industry is cotton. Up to fifty to sixty percent fibre that is used in producing yarn in India is cotton, and our country is among the largest producers of cotton in the world. But since it is an agriculture commodity, the government has a role in its sale. The main reason for our crisis is the increase in the minimum support price of cotton by 25 to 28 percent, which was approved by the government last year. Never before was such hike done in one go, because it cannot be absorbed by the industry. The worry struck us last year, but we were hoping that the prices of cotton might go up in the global market as well. But, in the last four to six months, the prices have fallen sharply in global market. So the production cost of our yarn has gone up and our prices are now not viable in the international market.

So, today, China’s spinning industry that used to consume 40 percent yarn of our total export is not buying from us anymore. Their spinners are buying their own yarn which is cheaper than India’s. Also, countries like Vietnam, which is our competitor, do not have to bear 3.5 percent import duty, unlike us, to sell their cotton in China.

S: Won’t cotton farmers suffer if the minimum support price is reduced?
MT: In countries like China, the agriculture commodity market is purely demand driven. No government agencies buy it from the market. All the agriculture commodities are sold at the market price and if the farmers happen to receive less money than the minimum support price, the government there transfers [the difference] directly to the farmers’ bank accounts. We have appealed to the government that this system should be brought in India too. We are not against the increase in the MSP.

Sagar is a staff writer at The Caravan.

Keywords: textiles demonetisation GST MSP minimum support price Cotton
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