The Ludhiana garment industry majorly uses three kinds of yarn- 100 per cent cotton, blended yarn (polyester/ cotton mixed) and 100 per cent polyester.
Due to rise of crude prices in the international market, prices of polyester yarn have increased to Rs 5 per kg. There are different kinds of yarns even in the polyester category and prices vary accordingly.
Secondly, the production of raw cotton in India came down to 325 lakh bales this year as compared to about 370 lakh bales last year. There was a reduction up to about 12 per cent. Due to slightly good demand of cotton and better exports, there arises a scarcity of raw cotton. Export of raw cotton overseas was about 60 to 65 lakh bales.
Increased rates of yarn are going to affect the garment industry badly. The increased rates would put more of a financial burden. The reduced VAT tax rate has not made any difference. Garment manufacturers fear that with rates of yarn increased, the consumer would pay more to buy the end product.
There is a feeling that instead of exporting raw cotton to other countries, value addition on yarn by making garments is a better option.