Spinning mills in Tamil Nadu halt production due to mounting losses

A growing number of spinning mills in Tamil Nadu, including small and medium- units, have ceased yarn production and sales due to severe financial losses. This follows similar actions by open-end spinning mills, marking the first time in two decades that India has seen an approximate 28 per cent decline in yarn and textile exports. In an emergency meeting, MSME Spinning Mills Associations in Coimbatore resolved to halt production as of today.

Industry representatives from the South Indian Spinners Association (SISPA), Open End Spinning Mills Association (OSMA), and India Spinning Mill Owners Association (ISMA) revealed, mills are being forced to sell yarn at prices dictated by dealers, leading to an estimated loss of Rs 40 per kg. For a typical mill producing 2,500 kg of yarn daily, this translates to a staggering daily loss of Rs 100,000.

G Subraminiam, President, ISMA, and S Jagdesh Chandran, Secretary, SISPA, emphasized,  these substantial losses make it impossible for mills to cover essential costs like bank loan repayments, cotton purchases, electricity bills, and GST. They warn that continued losses risk mills becoming non-performing assets (NPAs) and facing permanent closure.

The crisis is attributed to several factors, including an 11 per cent import duty on cotton, recent increases in loan interest rates, and rising electricity costs in Tamil Nadu. Additionally, unrestricted imports of yarn and fabric from countries like China, Vietnam, and Bangladesh are intensifying the industry's woes.

Industry associations are urgently appealing to the government for the removal of import duty on cotton, a reduction in bank interest rates to 7.5 per cent, and the restructuring and provision of fresh Emergency Credit Line Guarantee Scheme (ECLGS) loans with a six-month grace period and seven-year repayment term. They also advocate for a two-year moratorium and restructuring of existing term loans, urging the Reserve Bank of India (RBI) to adopt a more lenient approach toward the sector.

The industry is also calling for a halt to subsidies promoting new spinning capacity, a uniform national textile policy, and government intervention to boost yarn and fabric exports while restricting imports. They also propose extending the Minimum Support Price (MSP) to cotton yarn, suggesting a MSP of Rs 2.25 per count per kg to ensure sustainability.