Rising yarn cost hits Surat textile hub, fabric production likely to fall
Surat textile hub has been reeling under severe cost pressure amid poor demand for fabric at this time of the year. Textile weavers and processors have been facing acute crisis over the past one-and-a-half years.
On 15 May, a meeting of all Surat power loom co-operatives and job workers involving hundreds and thousands of workers was held to find a solution to the latest problem. It was decided that daily operating shifts should be reduced from three to two resulting in several workers proceeding on leave. Reducing shift implies fall in production. Industry associations/co-operatives have decided to work in two shifts of 6 hours or 8 hours, resulting in one third cut in production. A leading composite mill executive stated that post GST, there was already a significant fall in synthetic fabric production in Surat.
Ashish Gujarati, President Pandesara Weavers Co-op Society Ltd. Surat, told a national daily that Surat’s textile industry was not doing well since GST was imposed. Fabric production has seen a significant fall. Now rising yarn prices have forced producers to cut production by reducing number of shifts in order to save cost.
Power looms have another problem which according to a decision in the meeting will be represented to finance ministry. Synthetic fabric has 5% GST but yarn attracts 12% GST. This means when selling fabrics, they will not be able to claim full GST paid on yarn and hence large amount of unused tax credit remain in their books.
In November 2016, high-value currency notes were withdrawn, paralysing Surat textile economy was largely cash-based involving small processors and migrant employees. Last July, the industry was shut for long period after the GST was imposed. Now polyester yarn prices have increased 6-8% in the past one month and 12-15% in past 3 months. Thus, the total cost has increased 30% since January along with other costs. This unfavourable event is happening at a time when fabric demand is low, which is expected to recover only during festive season a few months later.