• Surat’s textile sector faces cost-push crisis as key input prices surge
Polyester yarn prices increased 6-8 per cent in the past one month and 12-15 per cent in past 3 months Surat textile weavers and processors have entered their third crisis in one-and-a-half years. In November 2016, high-value currency notes were withdrawn, paralysing Surat as its economy was largely cash-based involving small processors and migrant employees. Last July, the industry was shut for long after the Goods and Service Tax was imposed, rendering a big blow to textile processors, whose cost increased sharply along with compliance burden. The latest is increase in polyester yarn prices by 6-8 per cent in the past one month and 12-15 per cent in past 3 months. Total cost increased along with other costs since January has been put at over 30%. This is happening at a time when fabric demand is low. Demand will revive only when the festival season begins a few months later. Due to an extra month in Gujarati calendar, festivals will start with a month delay. Most weavers’ cooperatives and job works have together decided to cut one shift. If yarn is not weaved and fabric is not produced, job workers will not have that much processing work. Dhiraj Shah, Managing Director for the Shahlon Group explains that crude oil prices are rising consistently since many months. As a result, prices of petrochemicals like DMT, PTA, MEG, etc. are also rising. These are raw materials for producing polyester yarn largely used by Surat based power looms and hence said that, “At the time when slack demand season has begun, weavers have decided to cut production.” Synthetic fabric has 5 per cent GST but yarn attracts 12 per cent GST. This means when selling fabrics, they will not be able to claim full GST paid of yarn and hence huge amount of unused tax credit will remain in their books.