Spinning Industry Meltdown: The Desperate Need for Policy Reforms in Tamil Nadu and Gujarat

The spinning industry in Tamil Nadu, which comprises the South Indian Spinners Association (SISPA), Open End Spinning Mills Association (OSMA), and India Spinning Mill Owners Association (ISMA), is facing a severe financial crisis. In response to the mounting operating costs and unprecedented losses, these associations have made the difficult decision to halt production and the sale of yarn indefinitely starting July 15.  The state has around 2,032 spinning mills, out of the total 3,542 mills in India. This critical situation has the potential to cause significant job losses and negatively impact the economy. Urgent measures are needed to revive this struggling sector.

Challenging Times for the Spinning Mills:

Over the past few months, spinning mills in Tamil Nadu have experienced a sharp decline in profitability. Export figures indicate a startling 28% reduction in yarn and textile exports, a downturn not witnessed in the past two decades. Compounding this issue is the steep rise in cotton prices, with cotton per candy  (356 kg) prices soaring to Rs 58,000. Additionally, essential raw materials like 40’s yarn and clean cotton have become increasingly expensive, priced at Rs 235 per kg and Rs 194 per kg, respectively. The spinning mills find themselves unable to meet crucial financial obligations, such as loan repayments, cotton purchases, electricity bills, and GST payments. This alarming situation places these mills at risk of becoming non-performing assets (NPAs), ultimately leading to permanent closure.

Ramifications of the Production Halt:

The decision to suspend production and yarn sales has far-reaching consequences. Around one crore spindle units will cease operations, resulting in a daily production loss of 35 lakh kg of yarn. This amounts to a staggering revenue loss of Rs 85 crore per day and a significant reduction in electricity consumption, with 11 crore units of EB going unutilized. Moreover, this unfortunate development puts the livelihoods of approximately two lakh workers and ten lakh people associated with the industry at stake, intensifying the need for prompt intervention.

Appealing for Support:

In light of the dire circumstances, the federation of MSME spinning mills urges the central government to take immediate action. Their requests include the withdrawal of the 11% import duty imposed on cotton, which has led to inflated prices compared to international competitors. A reduction in bank interest rates from the current 11% to 7.5% is also sought to alleviate financial strain. These measures will help restore competitiveness, attract international orders, and safeguard the employment of thousands of workers.

Gujarat’s Watchful Eye:

The plight of Tamil Nadu’s spinning mills has implications beyond state borders. The spinning mills in Gujarat are closely monitoring the situation, and if yarn prices fail to rise in the coming month, Gujarat’s production may also decline by 15-20%. Both Tamil Nadu and Gujarat share common concerns regarding import duties, the need for a unified policy, and access to emergency loans to mitigate the ongoing crisis.

Conclusion:

The spinning mills in Tamil Nadu face a critical juncture as mounting operating costs and dwindling exports push them towards the brink of collapse. The indefinite production halt serves as a stark reminder of the urgent need for support. By addressing the challenges faced by the industry, such as import duties and high bank interest rates, the government can help restore stability and vitality to this crucial sector. Timely intervention is essential to preserve jobs, protect livelihoods, and revive the spinning mills, ensuring a sustainable future for this vital industry.

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