homeindia NewsIndia's cotton exports to shrink close to 30 percent in FY23

India's cotton exports to shrink close to 30 percent in FY23

According to Care Edge, cotton yarn export volumes have fallen 59 percent in just the first half of this year (to 2.89 lakh tonne in H1FY23 from 6.95 lakh tonne in H1FY22) and are expected to fall by another 28-30 percent in the second half of FY23.

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By Jescilia Karayamparambil  Dec 8, 2022 7:46:29 PM IST (Updated)

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Cotton prices, which had hit an eleven-year high in May this year, have cooled down. But the pick-up in domestic demand for cotton yarn has been sluggish, while weak global demand is keeping the export option out of reach.

For cotton yarn spinning and ginning mills, 2022 has not been a comfortable one. Cotton prices in India shot up to an 11-year high of Rs 1.1 lakh per candy in May this year and that meant a sharp rise in input costs for these mills. Even passing on some of this higher cost to their customers offered limited relief. Now, prices have cooled down considerably to around Rs 65,000 to Rs 69,000 per candy.
These lower prices have sparked some revival in domestic demand. Industry body Cotton Association of India (CAI) said spinning mills, which were working at 40-50 percent capacity when prices were higher, have hiked production to 60-70 percent of capacity. But mills said this pick-up in demand is not enough to make a material difference. To make things tougher, global shocks have dampened the export market.
Pulkit Agarwal, director at CareEdge Group said prices have corrected now to a significant extent. But the difference between Indian and international cotton is much of a concern. He added, "Now, the impact that we are seeing is on account of slowing global demand for textiles due to recessionary trends – we are seeing across various geographies."
According to Care Edge, cotton yarn export volumes have fallen 59 percent in just the first half of this year (to 2.89 lakh tonne in H1FY23 from 6.95 lakh tonne in H1FY22) and are expected to fall by another 28-30 percent in the second half of FY23.
The higher input costs, weak demand, and lower capacity utilisation put pressure on margins and even forced a few mills to down shutters. Players said passing on the higher costs has offered limited relief. A report by CRISIL said a further 5-7 percent could squeeze margins for cotton spinning mills before this financial year ends.
Jagruti Shashikant Patil, sales head at SK Traders said, "The cost of the raw material was rising. We had to increase the pricing of your products as well. We did shrink our margins, but I wouldn't say for a longer duration, because eventually, you have to increase your price." She added, "The company's turnover has definitely been impacted."
India's cotton production is estimated at around 344 lakh bales this year – that's 10 percent higher than last year. Experts say this should prompt a further drop in cotton prices.
But they warn that even that won't bring prices back to pre-COVID levels – meaning cotton mills will have to continue to deal with higher input costs, slugging domestic demand, and a weak export market for a while longer.
Meanwhile, the industry body has requested the withdrawal of 11 percent of import duty on cotton. "Indian cotton prices are ruling at 10-15 percent higher than the international cotton market. The removal of import duty on cotton is necessary to provide the Indian textile industry with a level playing field."
The body feels that this will allow mills to compete internationally and run at full capacity.

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