This has very much unnerved the spinning mills as well as exporters since experts feel the slump in exports may continue for another two years when the South Asian countries are expected to tide over their currency crisis. The monthly level of cotton yarn exports fell to as low as 32.76 million kg in February 1998 compared with last July's 42.22 million kg, indicating a decline of 22.4 per cent. In value terms the fall during this period has been much more at around 32 per cent from $148.64 million to $101.35 million. In other words even the present reduced exports are possible offering substantial price cuts.

This has already shaken economic viability of several spinning mills. According to some reports from Coimbatore, a few spinning mills are negotiating with their trade unions to layoff or staggerproduction, because of fall in demand, both in the domestic as well as overseas markets. The slack demand has led to an accumulation of unsold stocks. On the other hand, banks are reluctant to lend money to the industry.

Price realisations have gone down sharply because of undercutting by mills in the domestic as well as in the overseas markets. Some exercise has been underway to enforce price discipline among spinners, but this cannot be of much use as it is difficult to keep a watch on mills that are located at different places.

Cotton yarn exports were booming for the last several years and it was generally possible to exceed the target. Profitability remained quite good, because of the advantages of low cotton prices coupled with the relatively lower wages. This induced a number of existing units to enlarge their capacities and encouraged new entrepreneurs in the field. Establishments of 100 per cent export oriented units in this sector was quite common but the prospects are bleak atpresent.

Exports to quota countries used to be just around 15 per cent, the rest of the export sales were to non-quota countries. The Asian countries used to account for about 45 per cent of exports. Even now exports to quota countries are going on as usual and export quota commands a premium of about Rs 31-32 per kg. But exports to non-quota countries particularly to Asian countries are in doldrums and in other markets competition has increased.

The local market for cotton yarn remains dull, since powerloom operators are finding it difficult to sell their fabrics. The main reason for this situation is that the purchasing power of the common man has been on the decline because of the general rise in prices of other essential commodities. Secondly even when there is some decline in fabric prices at the wholesale level, its benefit does not reach the ultimate consumer.

The prices for cotton yarn in the local market are, therefore, subdued.