Last year during mid-December, a group of leading exporters of Tirupur urged mills’ associations to ensure the continuous supply of yarn as the spinning mills had stopped supply of cotton yarn and were not taking up fresh orders.
Now after 2 months, again the same group and many others met again and formed various committees to meet the textile mill associations and discuss the issue.
This is not just the scenario of Tirupur or a particular hub; apparel manufacturers across India are facing high yarn price issue from last four months.
In January 2021, cotton yarn prices increased 15 per cent on M-o-M and 30 per cent on Y-o-Y basis. As per the industry informed apparel manufacturers, few specific yarns aren’t easily available as they are very much in demand. For example, 40’s combed yarn price as per the market is Rs. 279 per kg but the actual price is somewhere around Rs. 300 per kg and even at this price, this yarn is not available for all. There are apprehensions that price can increase again. Even today in mid-March, prices are increasing.
Since December 2020, yarn prices have increased by Rs. 65 per kg; it has never gone up so high in the last few decades.
Also Read: To protest yarn price hike, Tirupur’s apparel production will remain closed on 15 March
It is also pertinent to mention here that the international prices also rose by 13-17 per cent Y-o-Y, led by the buoyant China’s demand for US cotton, which is having a rub-off effect on cheaper Indian cotton prices.
SMEs worst affected
As usual, when any unexpected or sudden challenge arises, SME sector faces most heat; this challenge has also had worst impact on them.
In few cases, even knowing that there will be hike in the yarn price and at the same time, there will be orders from international buyers, SME exporters can’t keep stock of yarn or fabric as they don’t have much resources.
Top players having vertical integrated set up and having resources to keep required stock of yarn or fabric with them are comparatively less impacted due to this challenge.
Why the hike has happened
China factor!
There are different opinions on how much China is responsible for this problem. India Ratings and Research (Ind-Ra) is strongly of the view that China’s demand for India’s cotton has pushed domestic yarn prices higher. The agency says that while yarn production was substantially lower on Y-o-Y basis up to 8 months in FY ’21, exports increased by higher single digits Y-o-Y due to a healthy demand from neighbouring countries. China’s demand for Indian yarn resumed to pre-Covid levels during November-December 2020, as against a volume drop from Bangladesh and Vietnam during same period.
According to the official data, India’s cotton yarn export was worth US $ 2.61 billion in 2020 and noted 8.50 per cent Y-o-Y fall. Shipment to China remained negative by 25.16 per cent that is at US $ 571.66 million, while it upped by 41.54 per cent to US $ 141.67 million as far as Vietnam – the 3rd top exporting destination for India – is concerned.
Though a chunk of the industry is also of the view that yarn prices went up because of pipeline drying, cotton and other fibre prices going up, industry is more optimistic of 2021.
During pandemic, consumption patterns changed but there was consumption; production, however, got impacted and is still not up to full capacity across globe.
Apparel manufacturing industry is also of the view that mills are using unethical practices as the situation is in their favour.
Cartel!
Some of the industry insiders claim that a cartel is working in the country, which increases the rates of yarn without any basis and also creates an artificial shortage in the market. It seems quite logical as there is no significant increase in cotton prices.
Solutions, efforts made so far
With proper coordination amongst mills to apparel manufacturers supporting each other, this issue requires active steps at policy level and only Union Government can help at this front.
Banning yarn exports may not be in the favour of mills and yarn exporters but it is a strong solution as far as the plight of apparel manufacturers is concerned. Various associations have time and again also requested the Government to ban yarn exports to control prices in the domestic market.
At the same time, apparel exporters have also appealed to the international buyers to increase the price so that the apparel exporters are able to meet the higher production cost at this hour of crisis.
Even leading associations and local yarn traders have also requested the Government to reduce the import duty on cotton which was recently imposed in Union Budget as it is also increasing cost.
Trade bodies of apparel manufacturers have also made several requests to mills, traders and even job workers in this regard; they have requested to various Union Ministers also.
Need to learn from Nitin Gadkari
The challenge of raw materials’ price hike is not only faced by the textile industry but in last few months, even steel companies have raised the rates by 55 per cent.
Concerned over the steep hikes in the prices of steel and cement, both inputs for construction, in mid-December, Nitin Gadkari, Union Minister for MSME, Road Transport and Highways wrote a letter to Prime Minister Narendra Modi seeking his intervention to arrest the trend.
Prior to this, the Minister also accused cement units of forming cartels to raise the prices of the building material. Later he also warned steel cartel on price hike and said that he will use alternatives. He has been constantly pursuing the matter to ensure that the steel manufacturers reduce the prices.
On the other hand, despite all the hue and cry, so far Ministry of Textiles (MoT) has not come forward officially in this regard and not even any statement has come from the Minister or senior official of the MoT (at least at the time of writing this feature).
Pressure of politics
In this entire scenario, it is also pertinent to mention that due to the efforts of Tirupur Exporters Association, some movement has been seen on this issue as after the letter of Senior Congress Leader Rahul Gandhi, MoT contacted this forum and asked to furnish factual and authentic month-wise data of last 24 months with respect to price hike in cotton yarn for further examination of the matter.
This issue is getting momentum in Tamil Nadu as the state is the leading hub for textile and apparel industry and its state assembly election is due in the next few months.
What next
The big question is that when can one expect the situation to be more balanced and there are different opinions in this regard.
A chunk of the industry feels that as already yarn prices have retraced from January reaching the peak by 5 per cent, by April situation should become balanced as mills will start running fully and the issue of shortage and price increase will be solved, while at the same time, some are also of the view that looking at the developments, it is totally unfair to say anything.
In this entire scenario, there are some other views also it is being said that mills wish to change the Credit culture, especially in South India as over the decades a system has developed to buy yarn on long credit period which is not feasible in the changed scenario so mills are insisting cash payment and prefer to work with such garment manufacturers only those pay as per their convenience.
Whatever the reasons are for this hike, all stakeholders must accept that they have to work and grow together rather than working in silos or misusing the situation. At the same time, Ministry has to play active role at this front also. Textile mills and apparel manufacturers can’t survive without each other; they have to be supportive for each other.
Bharat Tex Special Report 2026 
