Sudden spurt in cotton prices this month has added to the problems faced by textile mills, particularly in southern Indian states of Telangana, Tamil Nadu and Andhra Pradesh.

Price of Shankar-6 variety of cotton has increased from Rs 37,300 per candy of 356 kg at the beginning of this month to Rs 40,950 per candy on June 20, 2016, showing a rise of nearly 10 per cent.

But the price increase has acquired momentum this month, especially during the two-day period from 15th to 17th June. The average price of Shankar-6 was Rs 39,850 per candy on June 15, which rose to Rs 40,925 on June 17, up Rs 1,075.

This sudden increase in prices has added to the already existing problems faced by textile and spinning mills, such as slowdown of exports, and devaluation of Chinese renminbi on August last. The problem is especially acute for those spinning mills that do not have enough raw material stock.

To meet this situation, textile and spinning mill owners in southern Indian states have decided to shut down operations twice a week. Late arrival of monsoon is among the reasons being cited for the abnormal increase in cotton prices.

Some industry bodies have suggested setting up a Cotton Price Stabilisation Fund to provide working capital at seven per cent interest rate.

With over 49 million spindles, the Indian textile industry is the second largest after China.