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China's demand for Indian yarn falls, affects mill owners

China may cut down on cotton yarn purchases this fiscal, slowing the good run that Indian spinning mills had had last year. Recovering from a rough patch in the previous few years, spinning mills across India did good business last fiscal with a surge in demand in the Chinese market.

Idle mills sprang to life across the southern states, boosted by healthy cotton production and the government’s decision to make yarn export eligible for benefits under the Incremental Export Incentivisation Scheme for 2013-14. In Gujarat, 80 new spinning mills with a capacity of two million spindles are coming up, especially boosted by the interest subvention announced by the state government to boost industrial growth.

For four years since 2008, mills across India had been going through hard times, battling global slowdown, volatility in cotton prices and a squeeze on power availability, especially in Tamil Nadu and Andhra Pradesh. During this period about 380 mills closed down, with Tamil Nadu and Gujarat accounting for about 70 per cent of this.

This year mills expect China to import lesser yarn, which means they will have to look for alternative markets. In addition to shrinkage in the Chinese market, mills in Tamil Nadu and Andhra Pradesh will have to bear power shortage and higher tariffs this year.