Yarn Price Hike: Impact on SMEs
Cotton is the most important raw material for the textile industry. It is used to manufacture different clothes and other fabrics, including a wide range of items from rugs to bedsheets. However, in recent years yarn price has been going up, and SMEs, in particular, are finding it difficult to purchase it and as prices remain high.
Apparel manufacturers in India are facing high yarn prices for many months. In January 2021, domestic cotton yarn prices increased 15 percent on a monthly basis and it was 30 percent on yearly basis. However, the international prices of yarn also rose by 13–17 percent compared to last year.
The yarn price hike’s impact on the SME sector is significant and massive. As the demand for cotton products increases steadily and the yarn price rise has been keeping pace with this growth rate, it has put big pressure on the SME sector. They could not hold a good position in the market as their purchase cost had also increased. Also, many SMEs have shown a loss in their earnings and some even closed their business. In this situation, most of them have decided to purchase yarns from other sources on long credit periods to remain profitable.
Only a visionary Union Government can help solve this issue with proper coordination among mills and apparel makers supporting each other. It is possible to minimise the loss of income through solutions such as matching yarn prices with the local cost of production and ensuring a reasonable supply at a reasonable price. Also, it has been reported that the Government is taking steps to meet the demand by growing cotton in various parts of India which can turn out to be beneficial. Apparel exporters are also asking international buyers to raise prices to meet the higher production costs despite the economic crisis.
All stakeholders must play their part to safeguard the interests of the entire sector. OfBusiness offers affordable high-quality yarn for SMEs. OfBusiness is a recognised raw material aggregator working with more than 200 SMEs in India.