Apparel prices unaffected by excise removal

With the removal of 10 per cent excise duty on branded apparels this Budget, hopes had risen about a fall in prices. The industry was looking forward to pass on the benefit to the customers. In fact, the apparel retail industry that has been reeling

under pressure owing to excise duty on branded garments, increasing raw material costs and low consumer sentiment was just about breathing a sigh of relief. However, rising in cotton yarn prices have once again hit the industry hard. Apparel manufacturers and exporters are contemplating increasing prices of their products by 10-15 per cent in the next few weeks rather than reducing them. But what’s worrying them is slow sales that has been a feature in the past one year.

Prices of cotton and cotton yarn have increased significantly over the past two months. While cotton prices have gone up by 14 per cent, that of cotton yarn rose a staggering 22 per cent in the past two months alone. With the current rise, the benchmark Shankar 6 variety of cotton is quoted at Rs 10,940 a quintal. The widely-traded cotton yarn of 30’s count is now quoted at Rs 220 a kg, up from Rs 180 a kg two months ago.

Though apparel manufacturers hoped for a correction in raw material rates for two months, the price continued its upward spiral even in April, which has exporters with little option but to pass a part of the additional raw material burden on to consumers. But the fear of rejection is also putting them in a dilemma, both from domestic and international markets, which in turn would hit their profits. Domestic players do not want to let the export opportunity that has come their way after two years of slowdown pass them by. In Mumbai’s spot yarn market, however, the benchmark variety of 40’s count was quoted steeply higher at Rs 256 a kg this week.

Competition on the export front is also another cause of worry. Because players are facing stiff competition from Asian countries, including China, Bangladesh, Vietnam and Indonesia, in addition to Cambodia due to cheap labour costs in those countries. On the other hand, China imports a substantial amount of cotton yarn from India, as the cost of production in that country is higher, owing to high cotton prices. This led to a rise in demand for yarn from domestic companies.

As per the government figures, India exported 758 million kg of cotton yarn during the April-December 2012 period, 20 per cent higher than in the corresponding period a year ago. The Cotton Yarn Advisory Board under the Ministry of Textiles has pegged cotton yarn exports to set a new record this year at 1,000 million kg.