Fiscal FY09 a turbulent year for spinning mills

COIMBATORE: Till last year, spinning mills in the region were busy expanding capacity and modernising looms. The mill owners could not think of taking a break from their work schedule.

Now, saddled with idle capacity and the export markets hit by global recession, they are looking at visiting unexplored tourist spots to go for a vacation with family.

"Last year, the same time, we were completely occupied with our mill���s expansion plans. We doubled our spindles capacity to 2.12 lakh spindles. But nearly 40% of the capacity addition we made are lying idle due to the power shortage and global recession," said KPR Mills MD P Natraj.

He is planning a trip to Singapore this summer. The fiscal 2008-09 was one of the most difficult years in the three decade history of Southern India Mills Association (SIMA), said SIMA deputy chairman and Rajaratna Mills MD J Thulasidharan.

"The high cotton price, power shortage, revision of minimum wages revision for apprentices and the export sop for cotton have added to the woes of the spinning mills, which was already affected by global meltdown," he added.
The country���s yarn production was down by nearly 20% in the last fiscal.

Data with SIMA show the country produced 4003.22 million kg in 2007-08 and it dropped to 3239.17 million kg last year. The last fiscal also saw the closing down of 392 textile mills in the country, rendering 2.54 lakh workers jobless.

Though the government announced three stimulus packages for the textile industry, still it wasn���t of any solace, said Mr Thulasidharan. "The mills were running only on 55% production due to the power shortage in the state, while the fixed cost like interest on machinery, building, salary bills remained the same," he added. While the cost of production of yarn went up, the selling price declined by 30% to 40%.

Few mills like KPR group, Precot, which took up major expansion early part of last year, saw their profits taking beat despite a sharp increase in top line growth.

The spinning mills reported better domestic sales than exports. S Dinakaran, JMD Sambandam Spinning Mills, Salem said the global market was not favourable to India and countries like Peru, Turkey and Egypt had also clamped anti-dumping duty on Indian yarns.

Also, neighbouring countries like Taiwan, Vietnam, Thailand and Pakistan got more government support and incentives which stood in the way of marketing Indian products, he added.

To top it all, the mills were hit by power shortage in Tamil Nadu and Andhra Pradesh. "While the mills are facing a 30% power cut in AP and 45% in TN", said SIMA secretary general K Selvaraju.

Also, the recent stimulus package given to a section of cotton traders by way of 5% tax incentive that too with retrospective effect added to the woes of the spinning mills. "It is the latest blow to the textile industry coming after the steep increase in MSPs and hesitation to dispose of procured cotton at reasonable prices," said Confederation of Indian Textile Industry (CITI) chairman R K Dalmia.

Rating agency, Fitch, has described the outlook for the textile industry as negative for 2009. "Now, it is time for optimising costs at every front, be it raw materials, labour or machine productivity or energy consumption," added Mr Thulasidharan.