In a drastic move prompted by mounting losses, small and medium-scale spinning mills in Tamil Nadu, India, have announced their decision to suspend yarn production. The industry’s downturn stems from a combination of factors, including a decline in yarn and textile exports, high import duties, increased loan interest rates, and fierce competition from foreign imports. As the crisis deepens, industry representatives are urgently appealing to the government for relief measures.
The MSME Spinning Mills Associations, following the lead of open-end spinning mills, convened an emergency meeting in Coimbatore on Wednesday and unanimously agreed to halt the production and sale of yarn effective July 15, 2023. This unprecedented step comes after nearly two decades of uninterrupted growth in yarn and textile exports, as the industry faces a staggering 28% decline in export volumes.
Representatives from key associations such as the South Indian Spinners Association (SISPA), Open End Spinning Mills Association (OSMA), and India Spinning Mill Owners Association (ISMA) emphasize that spinning mills are forced to sell yarn at minimal prices dictated by dealers. The prevailing market conditions have resulted in a loss of ₹40 per kilogram for spinning mills. For a mill producing 2,500 kg of yarn per day from approximately 10,000 spindles, this translates into a devastating daily loss of ₹100,000.
G. Subraminiam, president of ISMA, and S. Jagdesh Chandran, secretary of SISPA, jointly conveyed the gravity of the situation, highlighting the mills’ inability to cover essential costs such as bank loan repayments, cotton purchases, electricity bills, and GST payments. Without immediate intervention, these mills are at risk of becoming non-performing assets (NPAs) and facing permanent closure.
The industry also points to the adverse impact of the 11% import duty on cotton, which has hindered their ability to secure export orders for yarn, fabric, and clothing. Additionally, recent increases in loan interest rates have further strained their finances. Rising electricity costs in Tamil Nadu and unrestricted imports of yarn and fabric from countries like China, Vietnam, and Bangladesh have compounded the industry’s challenges.
To address this crisis, industry associations are urgently calling for the removal of the 11% import duty on cotton, a reduction of the bank interest rate to the previously established 7.5%, and a restructuring of the short-term loan under the ‘Emergency Credit Line Guarantee Scheme (ECLGS).’ They are advocating for a six-month grace period, a seven-year repayment period at a lower interest rate, and an extension of the term loan by a two-year moratorium.
Furthermore, the industry is urging the government to adopt a uniform policy for the textile industry across the country, halting any subsidies or concessions aimed at increasing spinning capacity in individual states. They emphasize the need for measures to boost yarn and fabric exports while closely monitoring and restricting imports.
In their final appeal, the industry is requesting the extension of the minimum support price (MSP) to cotton yarn, with a suggested minimum MSP of ₹2.25 per count per kilogram.
The ball is now in the government’s court, as the Indian spinning industry awaits decisive action to avert further damage and secure its future. The clock is ticking, and time is of the essence as the countdown to the industry’s potential collapse continues.