The Hindu Business Line : Falling raw material cost lifts fortune of textile mills, says SIMA chief

Coimbatore, Sept. 17 Textile mills, which faced a prolonged downturn due to multiple factors such as rising raw material prices, fall in demand and increasing power cost, are breathing easy with the raw material prices declining and the revival in demand, according to Mr J. Thulasidharan, newly-elected Chairman of the Southern India Mills’ Association (SIMA), Coimbatore.

The cash crunch faced by the textile industry has also eased to a large extent with the release of around Rs 650 crore to the mills in Tamil Nadu under the Technology Upgradation Fund Scheme (TUFS), he said.

Speaking to newsmen, he said, normally, the mills used to stock up cotton during October-December season.

But last year, the CCI (Cotton Corporation of India) mopped up nearly 40-50 per cent of the crop and it did not release this stock in the market.

The Union Textile Minister, Mr Dayanidhi Maran, has “promised to address this problem”. If CCI releases the cotton every week, it would be a win-win situation for the mills and the cotton cultivators — denying profiteering by middlemen. Mr T. Rajkumar, Vice-Chairman, SIMA, said the minister has also promised to open CCI depots at Madurai and Coimbatore, which would be a boon to the industry.

Crisis under control

The Minister was keen to help the mills save the 2 per cent tax on cotton and the depots would also help the mills save on transportation cost and their inventory also would be less.

Mr Thulasidharan was confident of the mills coming out of the crisis with the stock of finished goods “very much under control”, the yarn prices have eased in the past two months and cotton prices have declined slightly and said that “things are looking better” for the textile industry.

He was positive about the coming cotton season and said there could be a 10 per cent growth in textiles export during 2010, which he expected to be a “very good year”. When asked about the quantum of subsidy received under TUFS, Mr Thulasidharan said the mills in Tamil Nadu had received about Rs 650 crore out of about Rs 2,400 crore that was released by the Central Government recently.

The release pertains to much of the subsidy due for payment till the second quarter of this fiscal.

The total payment due till the next budget could be another Rs 1,000 crore under this scheme for the whole country, and the share of Tamil Nadu could be about 30 per cent of it.

Modernisation, expansion

He said while planning for investment, the mills take into account the subsidy they would be eligible for under TUFS, which was crucial for the cash flow of the mills. With the cash flow situation improving, companies also would look at the option of going in for modernisation/automation, which has become imperative because the user industries are ramping up their production facilities.

Mr Thulasidharan, answering a question on investments planned by the industry, said that because of the uncertainties faced by the industry in the recent past, many mills had to put off investments on modernisation/expansion. But with the anticipated turnaround in the fortunes of the mills, this will get a fillip.

Power purchase

He said the mills have sought the clearance of Tamil Nadu Electricity Board (TNEB) for buying power from Power Trading Corporation and other States.

The TNEB has, in principle, agreed to consider this proposal after the intervention of Mr Maran and the State Minister for Electricity, Mr Arcot N. Veerasamy.

The options being considered included the direct purchase of power by some of the larger mills, which have dedicated feeders for which five applications have already been submitted to TNERC; the pooling of power requirements by smaller units so that the offtake could be substantial; and the procurement of power for the whole year. The member mills’ requirement was about 500 MW and to offset power cut, they would need 100-200 MW, depending on wind power generation.

Mr Thulasidharan said most of the SIMA members had a capacity utilisation of 95-98 per cent till November 2008, which has gone down by more than 30 per cent because of the power problem. The mills were able to keep their productivity at about 65-70 per cent by using generators, which pushed up the power cost since captive power costs Rs 13-14/unit.

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