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COST OF PRODUCTION SURGES WITH INCREASING RAW MATERIAL COST

COST OF PRODUCTION SURGES WITH INCREASING RAW MATERIAL COST

 

The pandemic has disrupted the supply chain from many ends.

While on one hand the garment exporters are in jeopardy because of fresh lockdown in the UK, Europe and Australia on the other they are not able to give competitive pricing to buyers because of fluctuating costs of fibres, yarns, chemicals, packaging material, dyeing and production.

Vimal Shah, President, GEAR
Vimal Shah, President, GEAR

“The industry is at loggerheads. While on one hand the buyers are not placing fresh orders as they are already piled up with inventory and stocks from the last year on the other the increased cost of production is adding on to woes,” averred Vimal Shah, President, GEAR (Garments Exports Association of Rajasthan).

He informed that the fabric cost has increased by 40%, cotton cambric which was available at Rs 32/meter last year has gone up to Rs 50/meter, poly bag which was at Rs 125/kg is now available at Rs 200/kg.

“Gold dye a very important ingredient being used in Jaipur was available at Rs 150/kg has gone up to Rs 300/kg and the box for packaging which was earlier available at Rs 60 is now at Rs 110 to Rs 120.

There is a sharp increase in the cost of packaging and dyeing which has increased the cost of garment by around 30% to 40%,” he asserted.

Air and sea freight cost has also escalated manifolds because of this disruption.

Many factors contribute to why transportation costs have been increasing.

The shipping industry is experiencing a tight capacity market, which means there is strong freight demand, but a low supply of drivers and carriers.

Powerful and damaging weather can also cause freight rates to spike.

Ocean freight charges are soaring worldwide. Major shipping companies are flocking to routes to the Americas after a hike in demand from the United States and this is leading to a rapid rise in charges for shipping to Europe, Southeast Asia, etc.

“While earlier we used to send air freight to Japan at Rs/ 50 per kg it has gone up to Rs 250/KG.

The costing has shaken invariably.We cannot ask for higher price from buyer because the retail price has not increased and he cannot give the difference as required,” said a concerned Shah.

The rates of raw material are constantly fluctuating which is creating big hurdle for exporters in quoting cost of garment to buyer.

The industry which is already under tremendous pressure due to Covid 19 cannot afford to ask buyers for an increased price as they will swiftly move towards other manufacturing destinations who can offer same products at lesser price.

GEAR is in continuous talks with FM and Ministry of Textiles for revised rates of yarn prices, however, so far there has been no definite news or action.

“The rate of increase in yarn prices far exceeds that of cotton prices.

FM ANNOUNCES SEVEN MEGA TEXTILE PARKSThe steep increase in prices and unpredictability in availability of yarn means that garment exporters cannot honour commitments they made to their customers,” said A. Sakthivel, Chairman, AEPC.

“The entire country is the loser if yarn is exported at the cost of domestic and export oriented manufacturing industry.

It is akin to exporting jobs at a time when the entire country is doing its best to get people back to work,” said a concerned Sakthivel.

Sakthivel suggests that that export duty should be levied on exports of cotton yarn.

This will result in a sharp decline in domestic yarn prices and an increase in value addition and employment in the country.

And, it will result in only normal profits accruing to yarn spinners, not the super normal profit owing to the profiteering currently happening.

On one hand exports of yarn is considered to be a big hurdle; on the other constant increase of prices by spinning mills is also a big concern.

Vinod Kumar Gupta, Managing Director of Dollar Industries.
Vinod Kumar Gupta, Managing Director of Dollar Industries.

“There is currently good demand from the export market and spinning mills are taking advantage of the demand-supply gap.

Raw material prices have increased only by about 30%, but the mill owners have increased prices by 60%,”said Vinod Kumar Gupta, Managing Director of Dollar Industries.

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