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Yarn producers seek govt help to avert crisis

Updated March 27, 2014

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File photo

LAHORE: After several years of good business despite growing energy shortages, Punjab’s yarn producers could be headed for another crisis that may force many to close down factories to avert losses.

A confluence of domestic and regional developments is said to have obliged many spinners to stop purchasing cotton and production until the market stabilises, causing ginners’ unsold stock to pile up.

Major regional developments claimed to have made domestic yarn production ‘unviable’ include slowdown in Chinese demand for Pakistani yarn and 5pc rebate allowed by India on its yarn exports since January.

Domestic factors affecting yarn production in Punjab include rising electricity prices (currently standing at $0.18 per unit), unavailability of cheaper gas for captive power generation and strong revaluation of the rupee.

Yarn market has fallen like ninepins in the recent weeks,” a yarn merchant at Faisalabad’s Sooter Mandi told Dawn. He said Punjab’s spinning had flourished in last few years despite energy crunch on the back of a strong Chinese demand.

“But now the Chinese demand is tapering off. On top of that India with surplus cotton of 10m bales has entered the market with a big bang. India’s yarn isn’t only replacing Pakistan in China but also flooding our market because of 10-20pc price differential in various categories,” the merchant, who spoke on condition of anonymity, claimed.

“Power loom owners prefer Indian yarn despite its poor quality because of its low price,” he argued.

“I don’t have the exact numbers because India is sending yarn mostly from the sea route. But some in the market say at least 1m bales would have made their way into Pakistan’s market by the end of the present fiscal,” he reluctantly said.

A Lahore-based spinner contended that yarn imports from India could rise to 1.5-2m bales this year. “India has given rebate to damage our textile industry, which was feeling buoyed after getting GSP+ status from the EU.”

“We could have somehow survived competition from India but the recent rupee appreciation against the dollar and increasing electricity prices have broken our back,” said the spinner, who said at least 100 spinning factories in Punjab faced closure once their current cotton stocks are exhausted over the next few days.

He said the spinners wouldn’t survive Indian competition unless the government allowed them rebate to offset the effect of the currency appreciation, imposed 5pc duty on yarn imports, brought down electricity prices and provided gas for captive power five days a week.

The ginners approached the commerce minister last week to request him to force spinners to lift their stocks. “Since it’s not possible to force the spinners, the minister has promised to look into the possibility of pulling in the TCP to procure their unsold stocks,” an apparel exporter, who claimed he was present in the meeting between the ginners and the minister, said.

The value-added textile exporters are opposing restrictions on Indian yarn.