Representatives of the Confederation of Indian Textile Industry, South India Millers' Association, North Indian Millers Association, and Texprocil met in New Delhi on Monday to take stock of the situation faced by cotton spinning mills. Currently, the cotton spinning mills are facing crisis due to high input costs and subdued demand and thus decided to go slow on production.

In the meeting, it was decided to appoint an agency to study the gravity of the situation, prepare a memorandum, and send to the government.

Most of the mills have either already cut production by 15-20 per cent or are mulling to do so soon. Salem-based Sambandam Spinning Mills is one such. Its director S Dinakaran said that the mill is keeping operations suspended for one day every week, starting this month. This is the first time in 40 years that the mill has faced such a crisis that production has had to be scaled down.

While bigger players are resorting to a one-day production cut, smaller ones have opted to shut production for two days a week. The plight of cotton mills in north India, too, is similar.

What has added to the woes of the sector is the dramatic increase in capacity over the past few years on the back of incentives offered by various state governments. This, as well as a drastic fall in export demand, has put the sector in a shambles.

According to D K Nair, secretary-general, Confederation of Indian Textile Industry, the sharp decline in exports from a peak of 140 million kg a month last year to an average of 100 million a month in this quarter has put the spinning sector in doldrums. A 40 percent decline in export demand in such a short span was unexpected and the sector was not prepared for this. The devaluation of yuan might further hamper exports as Indian yarn has become more expensive in the international market in the after effects of Chinese currency's fall.

Dinakarn, who is also the chairman of Texprocil's yarn committee, said that the Chinese buyers have been delaying the LCs (Letters of Credit) and not opening the LCs. The mills are bleeding and there is no option other than suspending production. Of the 500 small mills in Tamil Nadu, most are keeping operations shut once or twice a week.

These mills are into blended yarn and fibre. Since there is no excise duty on cotton, the 100 per cent cotton yarn makers are disrupting production only once a week.

President of South Indian Spinners' Association, C Varadarajan said that as the textile sector is one of the largest employers, production cuts for a longer time could result in layoffs, resulting in labour unrest. The situation is precarious and the government should provide immediate relief to save the livelihood of millions engaged in textile sector.

There is also a need to revive the interest subvention, for release of pending TUF, and introduction of measures to expedite exports.

According to experts, the delay in disbursement of Technology Upgradation Fund, or TUF, has affected the sector.