Textile mills and spinning mills in Madhya Pradesh are facing high cost of production due to higher cotton prices, power tariff and labour wages followed by drop in exports. Less demand from the top buyer China and sluggish European economy is also squeezing margins of textile mills and making them uncompetitive in the global market.

Cotton prices have risen five percent in a year on expectations of lower output in the country. Lower exports have led to a surge in inventories and surplus in the local market which could further dampen prices of the finished product.

According to Suresh Maheshwari, president, Maral Overseas, a leading exporter of yarn and textile from the state, most of the textile mills are losing money because cost of production has gone up significantly and they are unable to market their products in the international market. Local mills have been exploring alternate markets for their products to offset the loss created by China. They have been trying to sell their products to Vietnam, Indonesia, Bangladesh and Pakistan but nothing can compensate the loss for China, he said.

Experts said demand from India’s leading buyers China and European Union has come down steeply in 2015 and the trend is likely to continue next year as well but moderate buying from United States, a leading market for garments, is expected to lend some support.

M C Rawat, secretary, Madhya Pradesh Textile Mills Association said that China was the major market but it has significantly reduced its buying to promote its domestic industry. Exports from local mills are falling and unsold inventories have risen.

Besides, drop in demand in the overseas market, high cost of export finance which is around 10 percent in India as compared to three to four percent in competing countries like Vietnam, Bangladesh and Pakistan has adversely impact on competitiveness, according the Cotton Textile Export Promotion Council.