The Hindu : Tamil Nadu / Chennai News : Spinning mills bear brunt of appreciation of rupee

Online edition of India's National Newspaper
Thursday, Jul 05, 2007
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Tamil Nadu

Tamil Nadu - Chennai

Spinning mills bear brunt of appreciation of rupee

N. Anand

Owners urge Centre to announce workable formula

CHENNAI: Owners of spinning mills in Tamil Nadu are facing a difficult situation following the appreciation of the rupee against the dollar.

Mill owners in the textile towns of Gobichettipalayam, Namakkal, Karur, Salem, Coimbatore, Dindigul and Tiruppur have shelved expansion plans and, according to representatives of trade unions and trade bodies, if the Centre fails to come out with a workable formula in the next few weeks, they will have to suspend operations for a few days every week.

Talking to The Hindu on Tuesday, Tamil Nadu Spinning Mills Association president A.P. Appu Kutti said: “In the present situation, we don’t see any future for the spinning mills. The future of 3.50 lakh employees is bleak. Banks are not interested in financing new mills, as we have built up overcapacity. It is a gloomy situation all around, as everyone is waiting for the others to make the first move either on the pricing or retrenchment front. We are keeping our fingers crossed.”

As per the running contract, the owners have to fulfil their existing orders in the next few days.

The yarn prices have hit the rock-bottom owing to the rupee appreciation, while cotton prices have increased. Bank interest rates have gone up from 8 per cent to 12.5 per cent. The contracts, entered into in January, will keep the mills running till July.

No new orders

“We are unable to book new orders at the prevailing rupee-to-dollar rate. The buyers don’t agree to a price hike. Labour shortage has added to our misery. In this scenario, it is better to close down our operations either for a day, two days or three days a week to cut production, instead of doing overtime. We are mulling this as a last resort, and will take a final decision in the next few days after consulting our members,” Mr. Kutti said.

According to him, there are over 2,000 spinning mills in Tamil Nadu.

On an average, they produce eight tonnes of yarn a day, roughly Rs. 1.80 crore worth of business.

Workers to return

Tiruppur Exporters Association president A. Sakthivel said: “By August, we expect 25-30 per cent of mills in Tiruppur to remain idle owing to lack of orders, and operations in ancillary units to come to a grinding halt. Out of the 2.50 lakh workers at Tiruppur, 60-70 per cent are from other States. Now they will be asked to go back… Overall, the situation is turning from bad to worse.”

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