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Spinning mills grapple with cash crunch, falling demand
Spinning mills are cutting yarn production due to demonetisation, rise in cotton prices and fall yarn exports to China. are cutting yarn production due to demonetisation, rise in cotton prices and fall yarn exports to China.
Guntur: Spinning mills are cutting yarn production due to demonetisation, rise in cotton prices and fall yarn exports to China.
Some mills have reduced output up to 20 per cent, depending upon their capacity, and they will face severe crisis if the situation continues.
Spinning mill owners say they are unable to buy cotton as farmers are demanding only cash, which is in short supply in the wake of demonitisation of high value notes.
According to industry sources, farmers are not accepting cheques or electronic transfer of money to their account.
Farmers on the other hand, fear that the money credited to their account by cheques or electronic remittances from mills might be adjusted by banks towards the crop loans they had availed. Hence, they are only accepting cash in cotton sales.
The price of cotton too has increased by about Rs 1,000 from Rs 4,000 a few weeks back. Demonitisation has also dealt a blow to mills in another aspect too.
Traders who purchase cotton yarn in the market are not paying cash to the spinning mill owners immediately due to cash crunch.
Besides paying in cash to farmers to buy cotton, the spinning mill owners need cash for freight charges in cash as lorry owners do not accept other modes of payment.
For payment of wages to the workers, the mills have opened bank accounts. The spinning mills are already in crisis following fall in demand for yarn caused by reduction in demand for garments. Around one lakh people are working in over 250 spinning mills in the State.
Guntur district Chamber of Commerce and Industry president and spinning mill owner Atukuri Anjaneyulu said, “Due to cash crisis, we are gradually reducing yarn production. If the same situation continues, industry will plunge into serious crisis.
We are unable to pay cash to the farmers. On the other hand, yarn stocks are piling up. Workers are wages in cash. We need some more cash to meet daily expenses" .
Viswateja Spinning Mill executive director Dasari Chandrasekhar said, “Demonetisation is having a cascading effect on spinning industry. Due to shortage of cash, it is difficult to pay cash to the farmers and workers.
We are opening bank accounts to the workers to pay wages into their bank accounts. Demand for fabrics is gradually coming down.
Spinning industry is passing through a severe crisis. The government has to release Rs.800 to Rs.900 crore subsidies.
