CHAPTER-1

INDIAN TEXTILE INDUSTRY

Textile accounts for 14 % of India’s industrial production and around 27% of its exports

earnings. Textile industry in India covers a wide gamut of activities ranging from production of

raw material like cotton, jute, silk and wool to provide high quality products such as fabrics and

garments to consumers.

Man made fibres account for around 40% share in a cotton dominated Indian textile industry.

India accounts for 15% of world‘s total cotton crop production and records largest producer of

silk.

Industry uses a wide variety of fibres ranging from natural fibres like cotton, jute, silk and wool

to man made fibres like polyester, viscose, acrylic and multiple blends of such fibres and

filament yarns.

Textile industry plays a significant role in Indian economy by providing direct employment to an

estimated 35 million people, by contributing 4% of GDP and accounting for 35% of gross export

earnings. Textile sector contributes 14% of value addition in manufacturing sector.

It is the second largest employer after the agriculture sector in both rural and urban areas. India

has large pool of skilled labour, experienced in technology skills.

Almost all sectors of textile industry have shown significant achievement. Sector has shown a

3.66% CAGR over the last five years.

SEGMENTS OF INDIAN TEXTILE INDUSTRY

1. Woollen Textile

2. Cotton Textiles

3. Silk Textiles

4. Readymade Garments

5. Jute And Coir

6. Hand-Crafted Textile Like Carpets

7. Man Made Textiles

1

Indian textile industry in a very short span had made a distinct position globally, alluring the

globe towards the ‘World of Indian textiles’.

It’s not just the present that is shinning like a bright start but also the future, as the textile export

market of India is expected to reach a high of $50 billion by 2010. This will eventually make a

profit by 300%. In order to attain this target Indian textile industry has already started improving

their design skills, including a combination of various fibres. Indian textile industry is all set to

meet international standards and is planning to invest $5 billion in machineries very soon.

Most of the international brands like Marks & Spencer, JC penny, Gap have started procuring

most of their fabrics from India. In fact, Wal-Mart, who had procured textile worth $ 200 million

last year, intends to procure $ 3 billion worth of textile this year. The golden phase of the Indian

textile industry has just begun where the world is chasing it from all nooks and corners.

Indian Textile Industry: Changing Profile

The Indian textile industry has embarked on an ambitious programme of modernization and

technological up gradation in recent years to transform the textile sector from a state of low-

technology level to a producer of high-technology products. Technological up gradation in India

has resulted in -

o A shift from commodity-based trading to high value-added fashion garments.

o Vertical integration and horizontal consolidation of production process leading to lowering of

manufacturing costs.

o Improved productivity gains.

o Efficient supply chain management.

o Development of economies of scale.

2

PROBLEMS FACED BY INDIAN TEXTILE INDUSTRY

The Indian textile Industry had been plagued by obsolescence, labour problems, raw

material vagaries and lack of modernization including that of spindles.

The post fabric stage processing technology has also been lagging but is now coming up

fast with infusion of textile processing technology.

SSI firms perform the majority of weaving and processing operations. The level of

weaving technology is of lower order and knitting units don't possess capacity to

perform dyeing, processing and finishing to international standards.

Textile exports during the period of April-February 2003-2004 amounted to $ 11,698 million as

against $11,142 million during the same period, showing increase of around 5 percent.

3

1.2

CURRENT SCENARIO

The global economy is passing through recession. The international trade in textiles and clothing

reached to $583 bn in 2007, which is expected to decline by $20-25 bn in 2008.

The Indian textile industry exports about 40% of its output, of this about 60% is destined to USA

and EU markets.

It is expected that the textile and clothing exports from India may decline by 10-15%, although

countries like China, Bangladesh and Vietnam are expected to record growth in their textile

exports

Steep rise in MSP of cotton and incentives on export of cotton have seriously impacted the

textile industry

During the past few years, Indian textile industry has attracted huge investments. As a result, the

capacity in the entire chain has expanded beyond the current demand. In the context of declining

economic activities, even the domestic market is not able to absorb the surplus generated by the

industry so, it is tough time for the industry.

The industry therefore has to strengthen its competitiveness to realize the Vision of $50bn textile

exports set out in the National Textile Policy 2000.

4

CHAPTER 2

2.1 ABOUT VARDHMAN

Vardhman, a household name in northern India, has carved out a niche for itself in the textile

industry. The vardhman group was set up in 1962 by Late Lala Rattan Chand Ji Oswal, Father of

present Chairman and Managing Director, Shri S.P. Oswal. The group portfolio includes

manufacturing of yarns, fabrics, sewing threads, fiber and steel.

The industrial city of Ludhiana, also known as “The Manchester of India” nestles the corporate

headquarters of Vardhman group.

The group started its journey with an installed capacity of 14000 spindles in 1965 in Ludhiana.

Over the years the group has expanded its spinning capacities besides adding new business. The

group is now one of the largest conglomerate in the country with a turnover of about Rs. 2700

crores (2007-2008). The group has also diversified into yarn processing, weaving, sewing thread,

fabric processing, acrylic fiber manufacturing and special/alloy steels. Today, close to 23000

people is the organization’s most important asset- its human capital.

The group presently(2007-2008) has 19 manufacturing locations, spread across 5 states, with an

installed capacity of 7.25 lakh spindles (expandable to 8.5 lakhs by the year 2009-2010), 3408

rotors, 810 air jet looms (expandable to 900 by year 2009-2010), 33 tons/ day processing facility

for sewing threads, 63.5 metric tons/ day yarns and fibers dying capacity, 82 million meters/

annum processing facility, 18000 tons / annum production capacity for acrylic fiber and 1 lakh

tons / annum of steel capacity.

The company also has a strong presence in various countries like Japan, Hong Kong, Korea,

U.K., and E.U. in addition to the domestic market. Vardhman is earning laurels by exporting

yarn and fabrics of international quality to several countries in the west, Africa and the far east,

earning valuable foreign currency for the country, Vardhman is the first organization among the

textile industries to receive the ISO 9001/ ISO 14000 quality awards in India.Today the

Vardhman group comprises 3 listed and 2 unlisted companies-

5

Listed Companies

- Vardhman Textiles Ltd. (formerly Mahavir Spinning Mills Ltd.)

- Vardhman Acrylics Ltd.

- Vardhman Holdings Limited (formerly Vardhman Spinning and General Mills Ltd.)

Unlisted Companies

- VMT Spinning Company Ltd.

- Vardhman Yarns and Threads Ltd.

COMPANY PROFILE

Registered office/ corporate office: Chandigarh Road, Ludhiana (PB.)

Date of incorporation: 27 December, 1962

Listings on Stock Exchange: Bombay Stock Exchange, Bombay,

National Stock Exchange, Mumbai

Ludhiana Stock Exchange Association Ltd.

TOP MANAGEMENT

Chairman & Managing DirectorMr.S.P Oswal

Managing Director,VYTL Mr.D.L Sharma

Managing Director, VAL Mr.B.K Chowdhary

Executive Director,VTL Mr.Sachit Jain

President & Director(Incharge

Baddi Operations)

Mr.I.M.J.S Sidhu

CE(Operations)Yarn Mr.Neeraj Jain

6

7

FUNCTIONAL DEPARTMENTS HOUSED IN CORPORATE OFFICE

DEPARTMENT HEAD OF THE

DEPARTMENT

Corporate MIS Mr.Neeraj Jain

Finance & Accounts,Taxation &

Secretarial

Mr.Rajeev Thapar

Raw Material Mr.I.J. Dhuria

EDP & IT Mr.Z.S. Chowdhary

CMY & HR Mr.Maheah Arora

Export Mr.Kupleep Jain

Projects & Purchase Mr.D.S. Kalra

Internal Audit Mr.Deepak Sood

Law & Commercial Mr.Rajesh Chopra

BANKERS OF THE GROUP

Allahabad Bank

State Bank Of India

Bank Of America

ICICI Bank Ltd.

Canara Bank

State Bank Of Patiala

Standard Chartered Bank

Deutsche Bank

Axis Bank

8

9

2.2 VARDHMAN’S VISION

To be globally recognized

as a Leading Supplier of Quality Products"

S P Oswal, Chairman-

Vardhman Group

MISSION STATEMENT

10

Vardhman aims to be the world class Textile organization producing diverse range of products

for the global Textile market. Vardhman seeks to achieve Customer delight through excellence in

manufacturing and customer service Based on creative combination of state of the art technology

and human resources. Vardhman is committed to be a responsible corporate citizen. The mission

of the Vardhman Group can be summed up in a single line i.e.

“BEING WORLD CLASS SPINNERS BY PROVIDING HIGHEST QUALITY PRODUCTS

WITHIN MINIMUM COST”.

11

2.3 LOGO OF VARDHMAN GROUP2.3 LOGO OF VARDHMAN GROUP

The “Flame” signifies growth i.e. growth of the company along with the growth

of each and every individual associated with it whether he/she is a worker , a

white collar employee, a shareholder or a customer

.

The “Stick” symbolizes cotton that is the basic raw material of the core product of

Vardhman Group.

The “V” stands for the Vardhman Group.

12

2.4 CULTURE AND ITS ASPECTS

Professionalism

System Approach

Commitment To Quality

Excellence With Economy

Cost Consciousness

Human Resource Regarded As Valuable Asset

Emphasis On Teaching and Development

Preference To Human Value

Management By Participation

Open Door Policy In Sharing Ideas And Suggestions

Group Synergy

Emphasis on effective communication and coordination

Managerial strength and acceptance to change

Cordial Environment

Customer Focus

Honour And Reward

13

2.5 GROUP PHILOSOPHY2.5 GROUP PHILOSOPHY

The Vardhman Group has always emphasized on total customer focus in all operational areas. It

has continuously monitored and nurtured relationships with all the customers and business

associates.

VARDHMAN BELIEVES IN:

The fact that ‘change ‘is a way of life.

Absolute market orientation for a quick and positive response to the customer’s needs.

An uncompromising commitment to a flexible, professional and personalized service from

within a stimulating result oriented environment.

Delivery to a constant standard and on time.

Response approach to the benefits of R&D and the modern technology.

Having faith in individual potential and respect for human values.

Being a responsible corporate citizen with due respect to the laws of the land and its

environment.

Product to be the best available quality for premium market segment.

These underline the corporate philosophy, which has shaped VARDHMAN OF YESTER

YEARS into VARDHMAN OF TODAY.

Encouraging innovation for constant improvement to achieve excellence in all functional areas.

14

2.6 2.6

PRODUCT RANGE OF THE GROUPPRODUCT RANGE OF THE GROUP

Yarns

The constant endeavour to excel has transformed Vardhman into being the country’s largest

manufacturer and exporter of cotton yarns from India.

Catering to the diverse requirements of the local and global clients, Vardhman offers a wide

range of specialized grey, dyed and a variety of blended yarns in cotton, polyester and acrylic.

Technical tie-ups with the world class leaders from Switzerland, Germany, Japan and Korea

have provided state-of-the art machinery that has ensured a range of products admired across the

globe for their impeccable quality and service.

Latest technology, sourced from best available around the world, combined with dexterous hands

has made Vardhman a “Super Market of High Quality Yarns”

1994 was another milestone towards its mission to supply quality products. Vardhman further

improved the value addition to its existing range of tops, fiber dyed and cone dyed yarns.

This was result of new phenomena that emerged on the horizons of Vardhman and also of Indian

Textiles. A fully integrated dyeing plant was commissioned with technology from Nihon Sanmo

Dyeing Co. Ltd., Japan, the leader in dyeing technology in the world. It has a capacity of

processing 22 tones fiber/tops and 10-tonnes of yarns per day.

Today Vardhman Group has over 50 tones of dyeing capacity per day, spread over various

plants.

15

Sewing Thread and industrial thread

Vardhman is the second largest producer of sewing thread in the country next to Madura coats Ltd.. The

sewing thread manufacturing capacity is being expanded from present 17 tons per day to 22 tons per day

in its sewing thread plants located at Hoshiarpur, Baddi and Ludhiana. Sewing threads contributes 12

percent of the group turnover. It also manufactures high quality “specialty threads” at its unit in Baddi.

Weaving

Continuing its onward march on the value curve, Vardhman group entered weaving business in

1992 with a capacity of 7 million meter per annum. This capacity has been subsequently

expanded to 25 million meters per annum. The group has already made its mark as a quality

producer of grey poplin/ suiting/ shirting in the home market and has also entered the highly

competitive export market within this short span, now exporting fairly large volume of its

production.

16

Fabric

Vardhman’s recent entry into grey fabric weaving at Baddi (H.P.) commissioned in mid 1992

with a capacity of 70,000 meters per day. It has already made its mark as a quality producer of

grey poplin/suiting/shirting in the home market and also entered the highly competitive export

market within a short span, now exporting 90% of the production of Auro Weaving, the weaving

unit at Baddi. The group has initiated further forward integration by setting up a fabric

processing plant at Baddi. This plant Auro Textile has a capacity of processing 70,000 meters of

fabric everyday.

Fibre

Vardhman ventured into the manufacture of acrylic fibre in 1999. The joint venture, VAL, was

set up together with two leading Japanese business houses namely Japan Exlan Company Ltd., a

part of Toyobo group of Japan & Marubeni Corporation, Japan. It has a manufacturing

capacity of 18000 MT per annum at Jhagadia, Gujarat in Western India. The products are

marketed under the brand name VARLAN. ‘Varlan’ fibre has acquired Indian Market for its use

in a wide variety of applications such as Hand Knitting Yarns; Machine knitting yarns for

blankets, jerseys, sweaters, saris, dress material, upholstery, furnishing fabrics, velvets, Carpets

etc. The Group is one of the largest consumers of Acrylic Staple Fibre in India.

17

Special Steel

The steel business was setup in 1973 as diversification with a capacity of 35000 mt per annum.

Later on group acquired a steel plant from Mohta Group of Industries (now known as Vardhman

Special Steel) in 1986 and converted this loss making unit into a profitable business in first year

of operation with the group. Subsequently the steel mill has been modernized and expanded to a

capacity of 1.80 lacs mt per annum. Catering to high technology quality conscious alloy steel

segment, the unit has a reputation of being a dependable source of supply of special and alloy

steel to Indian/International standards.

18

2.72.7GROUP UNITSGROUP UNITS

SPINNING BUSINESS (Y)

Unit Location Product

range

Vardhman Spinning

& General Mills

Ludhiana,

Punjab

Cotton

blended,

acrylic, HKY

Auro Spinning Baddi, HP

Cotton

blended, fibre

dyed yarn

Arihant Spinning Malerkotla,

Punjab

Cotton,

blended,

melange yarns

Arisht Spinning Baddi, HP

Cotton,

blended yarns

Auro Dyeing Baddi, HP

Yarns and

fibre dying

Anant Spinning

Mandideep,

MP

Cotton ,

blended yarns

Vardhman Spinning & General Mills (Export Oriented Unit)

Baddi, HP Cotton yarns

VMT Spinning Co. Ltd. Baddi, HP Cotton yarns

Vardhman Yarns Satlapur, MP

(partly

commissioned)

19

FABRIC BUSINESS (C)

Auro Weaving Baddi, HPGrey poplin, Sheeting and shirting

MSML Textiles Division Baddi, HP

Auro Textiles Baddi, HPFabric processing

Vardhman FabricsBudhni, MP (upcoming)

SEWING THREADS BUSINESS (ST)

ST-I Hoshiarpur, Punjab

Sewing threads and industrial threads

ST-II Ludhiana, Punjab

Sewing threads and industrial threads

Vardhman Threads

LimitedBaddi, HP

Industrial threads

VARDHMAN SPECIAL STEELS BUSINESS (S)

Vardhman Special Steels Ludhiana, Punjab

Special steels, alloy steels, low carbon steels

VARDHMAN ACRYLIC BUSINESS

Vardhman Acrylic LtdBharuch (Gujrat)

Acrylic fibre

20

2.8 BUSINESS PORTFOLIO2.8 BUSINESS PORTFOLIO

Vardhman group has its presence in various businesses as yarns, hand knitting yarns,

sewing threads, fabrics, and Special steel.

Share of each business in group turnover at the time of establishment

21

Year of establishment and market position:

Product Year of Establishment Market Share (in %)

Yarn 1965 48.3

Steel 1972 13.96

Sewing Thread 1982 12.60

Fabric 1992 16.74

Fibre 1999 8.47

22

Business turnover yearly (Values in Crores)

Product wise turnover (2006-2007) (Value in Crores)

23

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

0

500

1000

1500

2000

2500

3000

3500

16791879 1907

17682074

22192210.272454

2676

3000

Value in Crores

24

MANUFACTURING AND DISTRIBUTION NETWORKMANUFACTURING AND DISTRIBUTION NETWORK

25

MARKET POSITION MARKET POSITION

Largest Spinning capacity in India - over half a million spindles.

Largest producer of Cotton, Synthetics and Blended yarns in the country.

Largest Dyeing Capacity of Fibre and Yarn.

Largest Exporter of Cotton Yarn.

Market Leader in Hand Knitting Yarns in India.

Largest range of Textile products.

Second largest producer of Sewing Thread in the country.

Collaborations with specialist worldwide.

ERP (Enterprise Resource Planning) enabled solutions for online order tracking

26

2.9 ACHIEVEMENTS & MILESTONE2.9 ACHIEVEMENTS & MILESTONE

Back home, the Vardhman Group became India's first textile company to be awarded ICO9002/

ISO 14002 Certification. It is the largest producer and exporter of yarns and Grey woven fabrics

from India. Vardhman is also the largest producer of tyre cord yarns and the second largest

producer of sewing threads in India. The Vardhman Group vision of excellence is matched by a

dedication and sincerity to be the best and excel in every industry it has a presence.

1989-90: State award for outstanding performance in exports.

1990-91: Bronze trophy third largest mill yarn exporter.

1991-92: Bronze trophy for third largest mill yarn exporter. Government of India Award for

outstanding export performance.

1993-94: Gold trophy for largest merchant exporter of yarn. Golden trophy for merchant of yarn

to non-quota markets. Government of India award for outstanding export performance.

1994-95: Gold trophy for largest merchant exporter of yarn.

1995-96: Outstanding export performance award.

1996-97: Silver trophy for highest performance in exports.

1997-98: Texprocil bronze trophy for third highest export in 100% EOU

1998-99: Texprocil silver trophy for second highest exports in EOU.

2002-03: Texprocil gold trophy for second highest exports in EOU.

2004-05: State award for outstanding performance in exports.

2005-06: Bronze trophy third largest mill yarn exporter.

2007-08: Silver trophy for second largest mill yarn exporter. Government of India Award for

outstanding export performance.

2008-09: Gold trophy for largest merchant exporter of yarn. Golden trophy for merchant of yarn.

Government of India award for outstanding export performance.

2008-09: Texprocil gold trophy for highest exports in cotton yarn category.

27

2.10 CORPORATE OFFICE2.10 CORPORATE OFFICE

Vardhman has a modern centrally air-conditioned multi stored corporate building that serves as

the original place from where all strategies, policies, programs, rules and regulation take shape.

The corporate building houses the offices of the top bosses including chairman cum managing

director, executive director, corporate general manager and corporate vice president of the

various functional areas. The other facilities at the corporate office include meeting rooms,

boardroom, conference halls etc.

DIFFERENT DEPARTMENTS OF VARDHMANDIFFERENT DEPARTMENTS OF VARDHMAN

Corporate HR and Personnel Department.

Corporate Exports Department.

Corporate Finance and Accounts Department.

Corporate Taxation Department.

Corporate Central Marketing Yarn Department

28

Corporate EDP & IT Department.

Corporate Internal Audit Department.

Corporate MIS Department.

Corporate Projects and Planning Department.

Corporate Raw Materials and Purchase Department.

Corporate Secretarial Department

Corporate Commercial Department

Corporate Law Department

2.11 ORGANISATIONAL HIERARCHY2.11 ORGANISATIONAL HIERARCHY

29

3. 3. SWOT ANALYSIS OF THE VARDHMAN GROUPSWOT ANALYSIS OF THE VARDHMAN GROUP

30

Chairman and Managing Director

Business Heads

Manufacturing Heads/ Functional Heads

Vice Presidents

Managers (M1 to M4)

Executives (E1, E2)

Officers (O1, O2)

Staff (S1 to S4)

Sub-Staff

STRENGTHS

Good Brand Equity

Good technological base with Foreign Collaboration

High Quality Standards

Increasing Production Capacity

Own Research and Development department

WEAKNESSES

Comparatively high prices

Lesser degree of promotional activity

Long Hierarchy

Susceptible to fluctuations in cotton

OPPORTUNITIES

As quality is good and prices are comparatively high, Vardhman can always easily liquidate

stock pressure by slight reduction in prices.

Strict payments are strengths at times as well as weakness. If a moderate policy, as per present

conditions are adopted, the dealers and customers shall be attracted to buy more and regularly.

Shortened hierarchy shall provide hope for better customer service.

THREATS

Smaller players in the market are using Vardhman’s process as a shield to push their product at

lower prices.

Capacity of Yarn Spinning is increasing rapidly in comparison to increase in market size,

resulting into the addition of new players. This would result in price cuts, liberalization of

payment, terms and conditions etc. the various functional areas.

4. Financial analysis

31

Liquidity ratios

Liquidity refers to the ability of the concern to meet its current obligations as and when they

become due. Liquidity ratios are calculated to measure short term financial soundness of the

firm.

Current ratio

The objective of computing this ratio is to measure ability of the firm to meet its short-term

obligations and to reflect the short term financial strength /solvency of a firm

It is computed by

Current ratio = Current assets Current liabilities

Graphical representation

2007-08 2008-09 2009-10

current ratio 5.86 6.67 7.62

0.5

1.5

2.5

3.5

4.5

5.5

6.5

7.5

8.5

Trend of Current ratio

Analysis and interpretation

From the above table it is clear that the current ratio of the "VARDHMAN " is increasing. As a

rule of thumb or as a convention current ratio of 2:1 is considered satisfactory. The current ratio

of the company is not up to the mark in any of the above three years. An insight into the B/S of

the company's major portion of current assets consists of inventories and sundry debtors. That is

why company can face some financial crises for paying its current liabilities.

Quick ratio

32

The objective of this ratio is to measure the firm’s ability to meet its short-term obligations as

and when due without relying on realization of stock.

Quick ratio = Quick assets

Current liabilities

Quick assets mean those current assets which can be converted into cash immediately or at a

short notice. It include cash and balance, marketable securities, debtors, bills receivable and short

term loans and advances.

Graphical representation

2007-08 2008-09 2009-10

quick ratio 2.54 4.1 3.47

0.25

0.75

1.25

1.75

2.25

2.75

3.25

3.75

4.25

Trend of Quick ratio

Analysis and interpretation

From the above table it is clear that the Quick ratio of the "VARDHMAN" is Fluctuating. Quick

Ratio is more than the Banker's rule of thumb i.e. 4: 1.in the years 2008-09 which shows the

company is satisfactorily liquid to fulfill C.L well in time but it is less satisfactory in the year

2007-08 and 2009-10 i.e. 2.54 and 3.47 resp.

33

Leverage ratios

These ratios provide an insight into the financial techniques used by a firm and focus on the long

term solvency position with regard to periodic payments of interest during period of loan,

repayment of principal on maturity or in predetermined installments on due dates.

Debt-Equity ratio

This ratio measures the relative proportion of debt and equity in financing the assets of a firm.

Debt-Equity ratio = Long-term debt

Shareholder’s fund

Graphical representation

2007-08 2008-09 2009-10

debt to equity ratio 2.04 1.95 1.8

1.675

1.725

1.775

1.825

1.875

1.925

1.975

2.025

2.075

Debt-Equity ratio

Analysis and interpretation

Generally, a ratio of 2:1 considered satisfactory. A very high ratio may be unfavorable, if very

high rates of interest have been paid and pressures and conditions of creditors have been

accepted. A high ratio shows a large share of financing by the creditors of the firm. A low ratio

implies a smaller claim.

Return on equity

34

The objective of this ratio is to find out how efficiently the funds supplied by the equity share

holders have been used.

Return on equity= Net profit after tax and interest *100

Equity shareholders fund

Graphical representation

2007-08 2008-09 2009-10

return on equity 2.7 2.87 3.91

0.25

0.75

1.25

1.75

2.25

2.75

3.25

3.75

4.25

Return on equity

Analysis and interpretation

A very high ratio in these favorable, if very high rates of dividends have been paid to equity

shareholder it is quite good for the reputation of the company. In 2007-08 it is 2.7 and then in

2008-09 its 2.87 and in 2009-10 its 3.91.its increases year after year.

Trend of turnover over past 5 years

Financial year Turnover(Rs. Crore)

35

2005-06 1957.25

2006-07 2159.24

2007-08 2346.36

2008-09 2495.38

2009-10 2767.22

Graphical representation

2005-06 2006-07 2007-08 2008-09 2009-10

Turnover(Rs. Crore)

1957.25 2159.24 2346.36 2495.38 2767.22

250

750

1250

1750

2250

2750

Turnover of Vardhman Textiles Ltd.

Turn

over

(Rs.

Cro

re)

Turnover of the organization is increasing over the past 5 years. During 2009-10 company has

shown a increase of 10.89% compared to previous year turnover. Also, the export of company

increased to Rs. 704 crore, showing an increase of 12.27% over the previous year owing to

enhanced production and better product/ market penetration.

Trend of Earning per share over past 5 years

Earnings per share = Net profit after tax and interest * 100

Number of equity shares

Financial year Earning per share (Rs.)

36

2005-06 33.98

2006-07 29.72

2007-08 21.21

2008-09 24.37

2009-10 37

Graphical representation

2005-06 2006-07 2007-08 2008-09 2009-10

Earning per share (Rs.)

33.98 29.72 21.21 24.37 37

2.5

7.5

12.5

17.5

22.5

27.5

32.5

37.5

Trend of Earning per share of Vrdhman group

Rs.

Earning per share for the year 2009-10 is 37 Rs. which is 51.82% higher than the previous year.

During the past decades, although turnover has increased but, earning per share has shown a

decreasing trend from 2005-06 to 2007-08. Earning per share has started showing an increasing

trend over the past 2 years.

Segment wise break up for financial year 2009-10

Segment Revenue(Rs. Crore)

Yarns 2186.15

Sewing Thread 385.52

Steel 254.61

37

Fabric 811.14

Acrylic Fibre 270.38

Unallocated 122.88

Graphical representation

10%

6%

20%

7%

3%

54%

Revenue of segments(Rs. Crore)

Sewing Thread Steel Fabric Acrylic Fibre Unallocated Yarns

Maximum i.e. 54% of the turnover is earned by yarn business, followed by fabric, sewing thread,

acrylic fibre and steel.

38

PART - B

39

TABLE OF CONTENTS

Chapter No. Particulars Page No.

1. Introduction to Topic 37-42

2. Review of Literature 43-51

3. Need & objectives 52-53

4. Research Methodology 54-56

5. Data Analysis and Interpretation 57-109

6. Result and Findings 110-112

7. Conclusion 113

Bibliography 114-115

Annexure 116-119

40

CHAPTER- 1

1.1 INTRODUCTION:

Botanical Name: - Gossypium Hirsutum

Family: - Malveceae

Cotton is a soft, fluffy, staple fiber that grows in a boll around the seeds of the cotton plant. It is

a shrub native to tropical and subtropical regions around the world, including

the Americas, Pakistan, India and Africa. The fiber most often is spun into yarn or thread and

used to make a soft, breathable textile which is the most widely used natural-fiber cloth

in clothing today.

Cotton is a natural fiber harvested from the cotton plant. Cotton is one of the oldest fibers under

human cultivation, with traces of cotton over 7,000 years old recovered from archaeological

sites. Cotton is also one of the most used natural fibers in existence today, with consumers from

all classes and nations wearing and using cotton in a variety of applications. Thousands of acres

globally are devoted to the production of cotton, whether it be new world cotton, with longer,

smoother fibers, or the shorter and coarser old world varieties.

41

Cotton is in the mallow family and produces delicate, lovely flowers. Other members of the

mallow family include hollyhocks and hibiscus, used to brighten gardens all over the world. The

cotton fiber forms around the seeds of the cotton plant and is designed to help carry the seeds

long distances on the wind so that the plant can distribute itself. Early humans realized that the

soft, fluffy fibers might be suitable for textile use and began to breed the plant, selecting for

fluffy, easily spun varieties.

The chemical composition of cotton is as follows:

Cellulose 91.00%

Water 7.85%

Protoplasm, Pectins 0.55%

Waxes, fatty substances 0.40%

Mineral salts 0.20%

42

1.2 History of Cotton:

Cotton is one of the oldest fibers known to humanity. Some of the earliest fabric relics found in

excavations of ancient civilizations have been cotton. Cotton was cultivated in Mohanjo Daro in

2500 B.C. Textiles of complex technique and design was found in Huaca Prieta, Peru circa 2400

BC. The word cotton itself comes from an Arabic word 'qutun' or 'kutun' used to describe any

fine textile. So, this is how the cotton evolved.

The first people in Eurasia to grow cotton for clothing and towels and sheets were the

Harappan people in India, about 2500 BC. We know because people wrote about cotton in

the Rig Veda, and that was written about 600 BC in India. Egyptian farmers also grew a little bit

of cotton, but cotton never became very important in Egypt, where people mostly

wore linen clothing.

In the 400’s BC, a Greek historian, Herodotus, wrote that in India there were "trees growing

wild, which produce a kind of wool better than sheep’s wool in beauty and quality, which the

Indians use for making their clothes" (Book III, and again in Book VII, where Herodotus tells us

that Indians fighting in Xerxes’ army were dressed in cotton). Around this time, the Ajanta Cave

carvings show that cotton growers in India had invented a roller machine to get the seeds out of

the cotton.

43

By the Guptan period, about 200 AD, the Indians made a good business of selling cotton as a

luxury to the Parthians to their west and to the Chinese to their east. The Romans, further away,

thought of cotton as an expensive luxury like silk. They had to buy it from Arabicor Parthian

traders. The Roman encyclopedia writer Pliny reported that in India there were "trees that bear

wool" and "balls of down from which an expensive linen material for clothes is made" (Pliny

Book XII 38).

1.3 Types of Cotton:

Egyptian cotton

Egyptian cotton is a fine, glistening cotton that has long thinner fibers. This is the most popular

cotton that is used to make bed sheets, cushion covers etc. It is light brown in color and is

suitable for strong yarns.

Sea Island cotton

Sea Island cotton is an expensive one, as its growth and processing takes a lot of efforts and cost.

It is one of the finest cottons present in the world of cotton and is often mixed with silk. The

clothes made out of this variety of cotton are expensive for the buyer, because of the high cost of

production.

Pima Cotton

Pima cotton has long and smooth fibers and falls in the category of Extra Long Staple (ELS)

types of cotton. Similar to the Egyptian cotton in terms of quality, it is a strong, soft, and durable

material, which make it one of the most famous and popular cotton types to be used for clothing,

towels and sheets.

Asiatic Cotton

This type of cotton can be found in India, China and near Eastern regions. It has harsh and coarse

fibers and is well suited to manufacture blankets, filters, coarse clothes and padding materials.

American Upland Cotton

American Upland cotton is one of the most commonly used cotton and is less expensive as well.

It is of a basic quality and is used to make several fabrics. The cotton is of an extremely versatile

nature and can be used to manufacture expensive shirts and denims as well.

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Canton Cotton

Canton cotton is a type of cotton used for manufacturing winter clothing like sweaters, because if

it’s heavy nature. It is strong, soft and difficult to pull apart, making it suitable for the purpose.

Canton cotton is the most popular type of cotton which people are aware of.

Organic Cotton

It is harder than the usual cottons and is not easily available in usual retail shops, neither are the

fabrics made out of this cotton are easily available. Organic cotton is minus any types of

chemicals and pesticides that are generally used in the production of other types of cottons. Even

the clothes manufactured out of this cotton are not exposed to the environmentally harmful

chemicals that the other materials are used to.

45

1.4 Yarn:

Yarn is a long continuous length of interlocked fibres, suitable for use in the production of

textiles, sewing, crocheting, knitting, weaving, embroidery and ropemaking. Thread is a type of

yarn intended for sewing by hand or machine. Modern manufactured sewing threads may be

finished with wax or other lubricants to withstand the stresses involved in sewing.[1] Embroidery

threads are yarns specifically designed for hand or machine embroidery.

1.5 Price:

Price can sometimes alternatively refer to the quantity of payment requested by a seller of goods

or services, rather than the eventual payment amount. This requested amount is often called the

asking price or selling price, while the actual payment may be called the transaction price or

traded price. Likewise, the bid price or buying price is the quantity of payment offered by a

buyer of goods or services, although this meaning is more common in asset or financial markets

than in consumer markets.

1.6 Fluctuation:

Fluctuation means changing or variations. It simply means to vary i.e. rise or fall.

46

CHAPTER- 2

REVIEW OF LITERATURE

Ge, Wang, Ahn, (2010) concluded that the integration of China's cotton market with the

international market, especially the U.S. market. Investigating the futures prices from the

Intercontinental Exchange (ICE) in the U.S. and the Zhengzhou Commodity Exchange (ZCE) in

China with several time series models, we find that a long-run cointegration relationship exists

between these two series. The two markets share price transmissions, and based on results from

an Autoregressive Conditional Heteroskedasticity (ARCH) model, we find their price volatilities

are similar. We argue that China's recent exchange rate reform and its gradual liberalization in

bilateral cotton trade since it joined World Trade Organization have had important impacts on

these futures markets. Based on these findings, several important economic and policy

implications are derived.

Keef, Zhu, (2009) concluded that There is an extensive literature on the Monday effect with

stock indices. It is regularly reported that the return on Monday is correlated with the return on

the prior Friday. The bad Monday effect occurs when the return on the preceding Friday is

negative. Cotton is an economically important commodity in the United States and around the

world. This investigation into the daily price seasonality in the U.S. cotton market is based on

spot prices from Memphis and futures prices from the New York Cotton Exchange. The

regression methodologies employ adjustments to control for undesirable properties in the error

terms. There are three main conclusions. First, the close-to-close changes in the futures price and

in the spot price exhibit a negative Monday effect. Second, a negative bad Monday effect is

observed on Mondays using close-to-close prices. The effect is present during the weekend

nontrading period and continues into trading on Mondays. Third, the negative bad Monday effect

does not appear to weaken in close-to-close prices and during the weekend over the period

examined (1987–2003). However, there is weak evidence of a temporal decline during trading on

Mondays. [EconLit Citations: G12, G14, Q14]. © 2009 Wiley Periodicals, Inc.

Gupta (2009) in his study titled, “Surge in prices of manmade yarns due to boost in excise duty”

remarked that prices of manmade yarn have increased by 3-4 percent, due to the effect of the

budgetary announcement in which excise duty on synthetic yarn has been boosted from 4 percent

to 8 percent. It is obligatory for units to pay excise duty at the fibre and yarn stage, but optional if

47

further processing of the synthetic yarn is undertaken. This decision has been opposed tooth and

nail by the textile sector. 4% additional duty has been imposed on synthetic yarns increasing

burden in cost of raw material, manufacturing, finished products etc. This has also raised the

challenges from China, since due to this decision, bank credit will drop and unemployment will

increase and ultimately will disturb economy of the industry. The only alternative is to increase

the prices of our products or shift to some other prospective markets, or shift from existing

product to another product.

Kulkarni (2009) in his study titled, “Is Eco fashion worth the price tag?” has analyzed that

today’s consumers are well aware of the threats imposed by global warming, and the necessity

for ecological living. But the fact of consideration is the price involved in adopting the lifestyle.

Eco clothing is still at a nascent stage, and requires a considerable amount of money and time for

the cotton cultivators to change from conventional to organic crop. Similarly, manufacturers

need more investments in machinery for eco clothing. Eco fabrics are generally more expensive

due to the fact that mass production is not practiced currently. Thus, even if the consumer gets

what he wants, it turns out to be a big burden on his/her purse and budget. If produced and

utilized in a proper way, it has a longer life span comparatively over conventional fabrics.

Manufacturers should focus on making outfits that are stylish, combined with a reasonable price

tag. These clothes should also be available in many places to suit the shopping needs of the

consumers. The slogan 'Going Green' is not just concerned with the impact of environment

related activities, but also brings about a positive change in the precedence of our wants and

needs.

Shah (2009) in his study titled, “Survival of textile industry rests on three key factors” states that

the Indian textile industry experienced a reverse trajectory in its exports during 2008, which is

not a welcome situation. Economists predict that economy will start reviving only by 2011. The

interim would be a period of stress for Indian textile industry. The industry has to practice

diversification of scale, quality and innovation to survive the current dire situation. Indian textile

industry should invest in Research and Development. The industry should also plan for

enhancement through expanding the product basket and product mix for a particular industry

based on its efficiencies and resources. It should not only aim at developing the international

market, but also focus on the growing middle class domestic market.

48

CRISIL, (2008) estimated cotton yarn demand to grow at a compounded annual growth rate

(CAGR) of 7.5 per cent during 2007-08 to 2012-13 from 2,845 million kgs to around 4,086

million kgs. The domestic consumption of garments and made-ups will continue to be the key

demand driver for cotton yarn. Further, within the domestic market, CRISIL Research sees high

growth in demand for finer counts of yarn driven by rising consumption of premium apparels

and made-ups. Although the appreciation of the rupee had led to a temporary slowdown in

exports, CRISIL Research expects India to consolidate its share in the exports market, given its

strength in the cotton-based apparel products and the opportunities for exporting high-value

high-fashion products. Consequently, CRISIL Research expects demand for cotton yarn derived

from exports to grow at a CAGR of 6.6 per cent from 710 million kgs in 2007-08 to 975 million

kgs in 2012-13. Direct yarn exports are likely to see a moderate growth of 5 per cent, given the

fact that some of the traditional export markets like China and Bangladesh have backward

integrated into spinning.

BROADBERRY, GUPTA, (2008) concluded that In the early eighteenth century, wages in

Britain were more than four times as high as in India, the world's major exporter of cotton

textiles. This induced the adoption of more capital-intensive production methods in Britain and a

faster rate of technological progress, so that competitive advantage had begun to shift in Britain's

favour by the late eighteenth century. However, the completion of the process was delayed until

after the Napoleonic Wars by increasing raw cotton costs, before supply adjusted to the major

increase in demand for inputs

Chattopadhyay (2008) in his study titled, “Indian Apparel Fabric Market Needs High Quality

Innovation” has concluded there are many instances of product developments regularly practiced

by the Unorganized Sector of the Indian textile Industry. It is the low cost, simplicity and speed

with which such innovations are translated into commercially viable and profitable products by

the so called 'Unorganized Sector'. Such novelty or fancy items have shorter product life cycle.

But those die hard entrepreneurs make sure that before the cycle comes to an end; some new

innovations are made and delivered. The purpose of this article is to highlight the in-born

strength of India. The Indians, by nature are more creative than productive. In terms of textile

productivity, China is far ahead of India. But in terms of innovation and designing that require

emotional quotient, India rules. Yet, despite having the talents and the demands, India lags

behind western countries in terms of remarkable product development. The R&D at the Industry

49

level is virtually non-existent because the Industry hardly understands the long term value of

Product Research.

Acajou (2007) in his study titled, “Management trends in textiles and clothing” concluded that

global trade and production of textiles and clothing and the organizational trends occurring in

enterprises in order to enable them to face increased competition due to trade liberalization and

the communications revolution. It introduces the concept of ‘quick response’ and characterizes

the problems it aims to overcome. The first part covers an analysis of advanced

telecommunication systems and the methodologies of TQM, as well as the use of ‘flexible

manufacturing systems’, some of which are still in an R&D phase. In the second part, product-

oriented organizational structures and flow type production systems are looked at. The need to

shorten lead time and of training multifunctional personnel is stressed.

Athalye (2007) in his study titled, “Continuous Dyeing” analyzed that the continuous dyeing of

Cotton, Polyester & their blends is gaining importance over the traditional exhaust dyeing

process owing to the major advantages in terms of uniformity of shades in long yardages, high

productivity, simple/ short dyeing process, low utility cost in terms of consumption of dyes,

chemicals, water, energy & low effluent generation. Considering the recent changes in the Indian

textile industry & the challenges faced from the global competition, the industry is moving

towards Economies of Scale with latest technology, stringent Product quality and Safety

standards, minimization of lead times of deliveries, higher pressure on Price-Trend towards high

economy, modernization, Automation & Re-structuring activities, growing importance of Brands

and retailers, fast changing consumer Tastes, increasing technical support requirements by the

user industry.

Curran (2007) in his study titled,” Clothing’s big bang: the impact of the end of ATC on

developing countries clothing suppliers” concluded that significant changes occurred in sourcing

patterns in the EU almost overnight. The big winners were India and China. Almost all other

developing countries lost market share, although often not as much as had been feared. The

impact of the liberalization was mitigated somewhat by the new quantitative restrictions

negotiated with China half way through the year, which resulted in a redistribution of market

share to other developing countries. Comparisons with the USA indicate that trends are rather

50

similar, although on that market more developing countries saw increases in their exports, partly

cancelling out losses in the EU.

Jain (2007) in his study “The U.S Textile Industry: Post NAFTA” has examined current trends,

which have resulted primarily from NAFTA. Specific focus has been given to yarn production

levels, price, imports, exports and labor. The purpose of the research presented in this paper was

to examine the effects of NAFTA on the US short staple spinning industry. Recently, there has

been a great deal of attention given to the decline of the US textile and apparel industry,

particularly the causes surrounding the decline. Many observers blame dumping by South-East

Asian countries, particularly China, in addition to the Asian financial crisis for this decline.

Others, however, credit the decline mainly to the North American Free Trade Agreement.

NAFTA was implemented on January 1, 1994, and began liberalizing trade and investment rules

between the United States, Canada, and Mexico. For textile products, the US reduced tariffs and

expanded quota-free access for items constructed from yarn and fibre produced by a NAFTA

country. Theoretically this agreement, as well as other regional trade agreements, such as the

Trade and Development Act (TDA), should have increased the demand for basic US textile

commodities, since the details of agreements of this type include a yarn forward clause.

Ray (2007) in his study titled,” Moving up the Value Chain?: Comparison of the Indian Textile

Industry with the Chinese Textile Industry ' Post-MFA” concluded that International trade in

textiles has been governed by the Multi-fiber Agreement (MFA) since 1974 and its successor,

the Agreement on Textiles and Clothing (ATC), since 1995. The phasing out of this agreement

has particular relevance for India, since India, along with China, is expected to make important

gains in the textiles market. This paper examines the relative performance of the Indian Textile

Industry with the Chinese industry and examines the prospects for future growth of the Indian

Textile Industry.

Switha (2007) in his study titled, “Price Volatility in the Cotton Yarn Industry: Lessons from

India” has looked at how India has addressed cotton yarn price volatility in the handloom sector.

In an era of modernization and globalization, India's handloom weavers have found their margins

squeezed by volatile cotton yarn prices, increasing domestic and international competition, and a

crowded value chain. This study examines the steps India has taken to address the yarn price

vulnerability of its handloom weavers. It begins by describing the importance of the cotton

51

industry to the country, before moving on to discuss both the cotton yarn value chain and the

price volatility which affects each factor along it. It then focuses on the national and local

interventions which have been initiated to address this volatility, and their varying degrees of

success and failure. The paper concludes with a set of recommendations for policymakers.

Aggarwal & Singla (2006) in their study titled,” Antecedents to Market Orientation: A Study of

Textile Companies in India” concluded that consequently, the textile industry has been exposed

to global market forces after the phasing out of the multi-fiber agreement. Narver and Slater

(1990) have emphasized that market orientation is the culture that creates the necessary

behavioral value among buyers thus leading to a continuous superior performance for the

business. Therefore, companies that are more oriented towards the market are better positioned.

The subject of market orientation has been of interest to both researchers and practitioners, for

several years: The major focus, however, is on studying what market orientation is and its impact

on the organization. Very little effort has been made to study the factors that impede or promote

market orientation. Much of the research has been carried out in developed countries, with data

collected from a wide variety of industries.

Hall (2006) in his study titled,” China Casts a Giant Shadow: The Developing World Confronts

Trade Liberalization and the End of Quotas in the Garment Industry” concluded that Developing

nations became attractive manufacturing locations thanks to their access to the restricted U.S.

and EU markets. The garment industry permitted even the poorest nations to participate in the

global economy in an environment largely protected from the harsh realities of unfettered

international competition. However, the structure of globalization in the garment industry, with

its characteristic distribution of manufacturing around the world, now appears extremely fragile.

The ending of the quota system on January 1, 2005, seems likely to result in a massive

concentration of manufacturing capacity in China.

Anderson, Valenzuela (2006) concluded that In the world, the largest volume of cotton

production is concentrated in countries like China, United States, India, Pakistan and Brazil. And

yet, low-income countries in Sub-Saharan Africa (e.g. Benin, Burkina Faso, Chad) and other

similarly poor countries elsewhere in the world depend heavily on cotton for earning foreign

exchange (Anderson and Valenzuela, 2006). Anderson and Valenzuela (2006) stated that exports

of lint cotton in US, Australia, Uzbekistan and Brazil accounts for almost two-thirds of the

52

world’s exports. The well known lint cotton importing countries in the world are Pakistan, India,

Greece, Djibouti, Egypt, Oman, United Arab Emirates, Srilanka, China, Brazil, Japan, Portugal,

Sudan, Morocco, Thailand, Denmark, Indonesia, Yemen, Turkey, Switzerland, Vietnam, Italy,

Mexico, Korea Republic, Russia Federation, Germany, Canada, South Africa, Tunisia (MoARD,

2004, cited in EBDSN, u.d).

Hornborg, (2005) concluded that method for quantifying the global exchange of (natural) space

and (labor) time underlying the economic success of the British textile industry in the late 18th

and early 19th century. Using historical statistics on inputs of land and labor embodied in cotton

and wool production, respectively, estimates are made of the amount of British land and labor

that were ‘saved’ by displacing fibre production to North America. By comparing inputs of land

and labor in the textile exports of England with those in some commodities imported from its

colonial periphery, and juxtaposing these data with exchange rates, estimates are also made of

unequal exchange. Using such methods, it is possible to bring together the Marxist concern with

unequal exchanges of labor time, on one hand, with the more recent concern with ecological

footprints, on the other.

Prasad (2005) in his study titled “The Impact on India of Trade Liberalization in the Textiles

and Clothing Sector” analyzed the impact of the elimination of textile and clothing (T&C) quotas

in 2005 on India. The simulations suggest that while Indian exports of T&C will continue to

expand in the presence of the safeguards on China, they will be affected adversely once these

safeguards are lifted. We argue that India could emerge much stronger and expand its trade in

T&C at a much faster pace, if some of the key domestic structural weaknesses are overcome.

Tewari (2005) in his study titled,” Post-MFA Adjustments in India's Textile and Apparel

Industry: Emerging Issues and Trends” concluded that India's recent surge in clothing exports

has occurred despite the lack of major FDI in textile and apparel or entry into preferential

regional trade agreements with buyer countries, or any significant direct role of global buyers.

Arguing that changes in domestic policy and in the structure of domestic demand throughout the

1980s and 1990s played an important role in triggering new growth in India's textiles and apparel

exports, and reshaping the capabilities of local firms, this paper examines three features of India's

53

recent integration into global clothing markets: the striking emergence of design as a source of

comparative advantage in Indian apparel, the growing importance of outward-bound investment

by Indian clothing firms in recent years, and the powerful new role that retail is playing in

organizing the Indian domestic market, driven in part by surging consumer demand from entirely

new mid-market youth segments.

Baffes, (2004) concluded that recent trends in cotton production focuses on cost reductions by

using less intensive inputs, for example, using genetically modified (GM) seed technology and

organic methods of production. Again, absence of opposition on GM cotton has allowed more

rapid adoption (Baffes, 2004).

Anand (2004) in his study titled, “Indian Textile Industry: Economics of FTA’s” concluded that

it is imperative that Indian textile industry should be given next five years as breathing time

enabling it to build capacities, overcome technology deficiency and consolidate operations.

Meanwhile the process of creating supporting infrastructure, competitively power, development

of cluster specific infrastructure, fast connectivity with ports should be taken care of. After five

years the status of industry may be reviewed and can be selectively opened through FTA’s or

gradual reduction in the duty structure as committed to WTO by government of India.

Irwin, (2002) concluded that The US produced about 80% of the world’s cotton in the decades

prior to the Civil War. How much monopoly power did the US possess in the world cotton

market and what would have been the effect of an optimal export tax? This paper estimates the

elasticity of foreign demand for US cotton exports and uses the elasticity in a simple partial

equilibrium model to calculate the optimal export tax and its effect on prices, trade, and welfare.

The results indicate that the export demand elasticity for US cotton was about −1.7 and that the

optimal export tax of about 50% would have raised US welfare by about $10 million, about 0.3%

of US GDP or about 1% of the South’s GDP.

Wakelyn, (2002) concluded that Cotton is both a fiber and food crop that is grown in about 80

countries. Annually in the world about 90 million 217.7 kg (480 lbs) bales [~19.6 million metric

tonnes (21.6 million tons)] of cotton fiber and 27 million metric tonnes (29.8 million tons) of

cottonseed are produced. Cotton is the most important natural fiber (about 37% of the textile

fiber consumed in the world in 2002) used to produce apparel, home furnishings, and industrial

54

products. Cottonseed is the world's No. 3 oilseed, used for vegetable oil, animal feed, and linters.

Over 90% of the world's cotton production is upland cotton (G. barbadense. In 2002 transgenic

varieties are about 25–30% of the cotton grown in the world. Commercial cottons are white.

There has been some interest in naturally colored cottons (shades of brown and green are the

main colors) and organic cotton but, at present, there is very little production of these cottons [<

20,000 bales worldwide; < 4455 metric tonnes (4800 tons)]. The origin, biosynthesis, biology,

development, production, harvesting ginning, classification, physical properties, morphology,

physical structure, chemistry, reactivity, economic aspects, utilization, and health and safety are

reviewed.

Baffes, Ajwad, (2001) concluded that price linkages and examines the degree to which cotton

prices are linked; it also tests whether such linkages have improved over the last decade. It

concludes that the degree of linkage has improved over the last decade while the main source of

this improvement appears to be a result of short-run price transmission and to a lesser extent

long-run co-movement.

Branson, Norvell, (1983) concluded that problems encountered while marketing particular

products. These products could be consumers, industrial or agricultural product (Branson and

Norvell, 1983; Kohls and Uhl, 1985; Mendoza, 1995). This approach is used to deal with list of

products and this detail analysis includes the classification of products characteristics of

products, source of supply, persons engaged in the exchange process, transportation of the

product, its financing, storage, and advertisement (Branson and Norvell, 1983). Institutional

analysis in this approach involves identifying major marketing channels, analysis of marketing

costs and margins (Mendoza, 1995).

55

CHAPTER-3

3.1 NEED OF THE STUDY

This research has been conducted to study the various reasons for fluctuations in prices of raw

cotton and cotton yarn. This study also conducted to know the effects of government restrictions

on prices of cotton and cotton yarn. This study also reveals the international and domestic market

of the raw cotton and cotton yarn. It is also conducted to know the basic reasons for fluctuations

in prices and to know the demand of the raw cotton.

56

3.2 OBJECTIVES:

To understand the domestic and international market of raw cotton and cotton yarn.

To analyze the fluctuations in prices of raw cotton and cotton yarn.

To find out the basic reasons for the fluctuations in prices of raw cotton.

To determine the impact of price on the demand of cotton.

57

CHAPTER-4

RESEARCH METHODOLOGY:

Introduction:

Research methodology is a way to solve the research problem. It may be understood as a science

of studying how research is done scientifically. In this we study various steps of research process

that are generally adopted to solve a research problem and to understand basic logic behind them.

In order to understand any problem completely, comprehensive research has to be undertaken.

Type of methodology that would be used to carry out the research is explained, justifying the

qualitative research method used in this study. In this selection of sample, collection of data,

statistical tools used in analysing data and limitation of study has been discussed.

4.1 Research Design

A research design is an arrangement of conditions for collection and analysis of data in a manner

that aims to combine relevance to the research purpose with economy in procedure. It constitutes

the blueprint for collection, measurement and analysis of data.

The research design for this research is descriptive.

4.2 Data Collection

For this research study the data has been collected by both the primary & secondary means.

For primary data collection I adopted the structured schedule, which was filled by 10

respondents who were selected deliberately from 10 suppliers of raw cotton for Vardhman.

Secondary data on the other hand, is collected from external sources such as TV, internet,

journals, newspapers, reviews, research articles, etc. In words of Catherine Dawson (2002).

Secondary data can be expressed as set of information which other researchers have already

collected relating to the subject. The secondary data for this particular study were collected

through internet, marketing journals and other company manuals.

Secondary data is comparatively cheaper and easier to obtain than primary data. The problem is

that often the reliability, accuracy and integrity of the data is uncertain, whereas primary data is

expensive and difficult to acquire but it is trustworthy.

58

4.3 Universe:

Universe refers to all the eligible respondents of a particular research around the world. For

primary, the universe for our research is all the suppliers who supplies raw cotton for the

Vardhman. For secondary, the universe for research is all the data related with raw cotton and

cotton yarn is collected from external sources such as TV, internet, journals, newspapers,

reviews, research articles, etc.

4.4 Population:

Population refers to part of universe from which the sample for conducting the research is

selected. Universe & population can be same in some researches.

The population of primary research is 10 suppliers of raw cotton who are working with

VARDHMAN.

The population of secondary research is world balance sheet of raw cotton & cotton yarn from

year 2003-04 to 2009-10.

4.5 Sampling Design:

A sample design is a definite plan for obtaining a sample from a given population. It refers to the

technique or the procedure the researcher would adopt in selecting items for the sample.

Non probability sampling technique with convenience sampling for primary research is used. For

secondary research judgmental sampling technique is taken.

4.6 Sampling Unit:

Sampling unit refers to smallest possible individual eligible respondent.

In this study the sampling unit is single individual respondent who is working with Vardhman as

supplier of raw cotton.

4.7 Sampling size

Sampling size refers to total number of respondents targeted for collecting the data for the

research. The sampling size of our study is 10 respondents with suppliers of raw cotton for

Vardhman.

59

4.8 LIMITATIONS OF THE STUDY:

The study based on survey through pre-designed questionnaires suffers from the basic limitations

of the possibility of difference between what is recorded and what is the truth, no matter how

carefully the questionnaire has been designed and field investigation has been conducted. This is

because the persons may not deliberately report their true responses and even if they want to do

so, they are bound to be differences owing to problems in the communication process. In

addition, there are some limitations, which are as below:

Data collection error may be there due to wrong response from respondents as some time they

are not the right person who takes actual decisions.

Some of the respondents can hide the real information.

Some time people did not have time to fulfill questionnaire, so they give only few information.

A sample size cannot always represent the whole population.

60

CHAPTER 5

DATA ANALYSIS AND

INTERPRETATION

61

5.1 WORLD COTTON SCENARIO:

World cotton production declined for the second consecutive year in 2008-09 by 10%. In

2007/08, the production levels had dropped by around 2%. In fact, the world cotton production at

102 million 480 lb. bales during 2009-2010, is the lowest since 2004-05. The reduction in world

cotton area for the second consecutive season was one of the reasons for the fall in production; a

significant area under cotton cultivation was shifted to grains and oilseed production because

these earned more attractive prices than cotton. In the last few years world cotton harvested area

declined at a sustained rate. According to the USDA data, area under cotton cultivation shrank to

30.32 million hectare in 2009-2010 from 32.94 million hectare in 2007-08. During 2008-09,

cotton yield also registered a decline compared to the previous year primarily on account of

unfavorable weather conditions across the world. After witnessing sustained improvement since

2000-01, the world cotton yield is forecasted to have moderated to 767 kg/ha in 2008-09 from a

peak of 797 kg/ha in 2007-08. World cotton yield has increased by around 17.8% between 2003-

04 and 2008-09 mainly due to extensive use of BT cotton varieties across the globe. Genetically

modified (GM) seeds constituted around 48% of the total harvested area globally in 2008-09.

During 2008-09, almost all the major cotton producing countries witnessed a decline (y-o-y) in

cotton production, except Pakistan and Australia. China, India, USA, Pakistan, Brazil and

Uzbekistan accounted for almost 85% of the world cotton production in 2008-09.

Even world cotton imports and exports declined during 2008-09. Exports from major exporting

countries such as the US, India and Uzbekistan fell and caused world exports to decline by

almost 25.36% in 2008-09. Imports from some of the major importing countries such as China,

Turkey and Pakistan also declined.

62

World Balance Sheet:

World Cotton Balance Sheet

(1,000 HA and 1000 480-lb. Bales)

Year Area

Harveste

d

Beginning

Stocks

Production Imports Total

Supply

Exports Consumption

2000/01 32015 51104 89098 26227 166429 26200 92198

2001/02 33727 49410 98701 29304 177415 29149 94442

2002/03 30751 54530 90976 30187 175693 30457 98390

2003/04 32317 47625 96735 34112 178472 33198 98073

2004/05 35725 48085 121504 33839 203428 35014 109014

2005/06 34744 60570 116696 44769 222035 44595 116680

2006/07 34588 62379 121969 38055 222403 37266 123720

2007/08 32948 63254 120056 38991 222301 38527 123062

2008/09 30732 62885 107455 30041 200381 30155 109740

2009/10 30322 63155 102907 34616 200678 34585 115890

63

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

2009/10

0

50000

100000

150000

200000

250000World Cotton Balance Sheet

Area Harvested

Beginning Stocks

Production

Imports

Total Supply

Exports

Consumption

years

1000

HA

& 1

000,

480

lb. B

ales

The current world production is 102 million 480 lb bales in 2009-2010. This is the lowest as

compared to 121 million 480 lbs. in 2004-2005 and it represents a 15.7% decrease relative to

2004-05 and a 4.6% decrease relative to 2008/09. Global cotton consumption increased from 92

million bales in 2000/01 to 115 million bales in 2009/2010 with an increase of 25 percent. The

cotton consumption increased for China (+500,000), India (+250,000), Vietnam (+150,000), and

Uzbekistan (+100,000).

As per latest report of USDA, the production of cotton decreased by 24,000 bales (2009 - 10 Dec

as compared to 2009 - 10 Nov). Country-wise report includes India (-450,000 bales) and Peru (-

150,000); Pakistan (+400,000 bales) and the United States (+96,000). Due to the reduction in

cotton production in the world and increase in world cotton consumption have resulted in

expectations of an 11.8 million bale production/consumption gap in 2009/10, which represents

11.5% of production, 10.3% of consumption, and 22.7% of ending stocks.

64

The world production/consumption gap may impact on prices and at the country level this may

impact on trade patterns. China’s 2009/10 production is 14.2% lower than in 2008/09 whereas

the Chinese consumption is anticipated to increase 3.9%.

Since 2004/05, the United States is the world’s largest cotton exporter. However, India has been

rapidly gaining export market share. Today India, with ample stocks and higher production, is

expected to continue to expand its share of the global export market. China having only half the

area of cotton production as compared to India, produces one and-a-half times more cotton, has

one-and-a-half times the world market share and three times the yield.

World cotton consumption has increased with 2% average annual growth rate since 1940s.

Developing countries consumed a major proportion of global cotton output since the end of

WWII. The share in global consumption of developing countries has become even more

significant since 2000s.

As per ICAC, the global cotton consumption of developing countries was approximately 78% of

global cotton consumption between 1981and 1999. Their ratio has been above 80% since 2000.

In 2010 they are expected to absorb almost 94% of global cotton output. 

As per USDA, the cotton harvested area in 2000-01 is 32 million hectares and in 2009-2010, it is

30 million hectares. So, that is a key issue that the global cotton agencies have to think upon.

This is a major issue that is to be resolved to increase our cotton production.

The global cotton imports also increases from 26 million 480 lb. bales to 34 million lb. bales.

The largest producers of cotton, currently (2009), are China and India, with annual production of

about 34 million bales and 24 million bales, respectively; most of this production is consumed by

their respective textile industries. The largest exporters of raw cotton are the United States, with

sales of $4.9 billion, and Africa, with sales of $2.1 billion. The total international trade is

estimated to be $12 billion. Africa's share of the cotton trade has doubled since 1980. Neither

area has a significant domestic textile industry, textile manufacturing having moved to

developing nations in Eastern and South Asia such as India and China.

65

5.2 WORLD COTTON PRODUCTION SCENARIO:

World Cotton Production Scenario:

(Millions of 480

lb. bales)2006/07 2007/08 2008/09 2009/10

China 35.5 37.0 36.7 32.5

India 21.8 24.0 22.6 23.5

United States 21.6 19.2 12.8 12.2

Pakistan 9.9 8.9 9.0 9.9

Brazil 7.0 7.4 5.5 5.8

Uzbekistan 5.4 5.4 4.6 4.0

Turkey 3.8 3.1 1.9 1.8

Australia 1.4 0.6 1.5 1.6

66

2006/07 2007/08 2008/09 2009/100

5

10

15

20

25

30

35

40

World Cotton Production China

India

United States

Pakistan

Brazil

Uzbekistan

Turkey

AustraliaYears

Mill

ions

of 4

80 L

b. B

ales

Top ten cotton producers — 2009-2010 (480-lb. bales)

 People's Republic of China 32.5 million bales

 India 23.5 million bales

 United States 12.2 million bales

 Pakistan 9.9 million bales

 Brazil 5.8 million bales

 Uzbekistan 4.0 million bales

 Australia 1.8 million bales

 Turkey 1.6 million bales

67

 Turkmenistan 1.1 million bales

 Syria 1.0 million bales

Interpretation:

Obviously, China PRP is holding the top position in world in cotton production but its cotton

production had been decreased 8.45 percent since 2006-07. But India is going on right track as

there is an increase of 7.79 percent since 2006-07 but there is also in the production of cotton in

India in 2008-2009.

On the other hand, USA is reducing its production day by day. As per USDA data, it is quite

evident that the USA cotton production had been reduced by 43.7 percent since 2006-2007.

The data for June 2010-2011 is estimated.

(Millions of 480 lb.

bales)2006/07 2007/08 2008/09 2009/10

United States 13.0 13.7 13.3 12.3

India 4.6 7.0 2.4 6.4

Uzbekistan 4.5 4.2 3.0 3.8

Brazil 1.3 2.2 2.7 1.9

Australia 2.1 1.2 1.2 1.8

68

5.3 WORLD COTTON EXPORT:

2006/07 2007/08 2008/09 2009/100

2

4

6

8

10

12

14

16

World Cotton Export

United States

India

Uzbekistan

Brazil

Australia

Years

Mill

ion

of 4

80 L

b. B

ales

Interpretation:

In the Export scenario, USA is on the top of the List. USA is almost exporting the same amount

of cotton what they are producing because the cotton consumption in USA is negligible as

compared to other countries especially India & China.

In India, the cotton export is on right track with an increase of 39.13 percent increase from 2006-

07 but there is a sharp decrease of 65.71 percent in year 2008-09 from previous year 2007-08.

69

Well, World’s No. 1 cotton producer is not in the list of top 5 exporter of cotton because of the

very large need or consumption of cotton in their own country.

70

(Millions of 480 lb.

bales)2006/07 2007/08 2008/09 2009/10

China 50.0 51.0 44.0 47.5

India 18.1 18.6 17.8 19.5

Pakistan 12.0 12.0 11.3 11.5

Turkey 7.3 6.2 5.1 5.6

Brazil 4.6 4.6 4.2 4.4

Bangladesh 3.2 3.5 3.8 4.0

5.4 WORLD COTTON CONSUMPTION

2006/07 2007/08 2008/09 2009/100

10

20

30

40

50

60

World Cotton Consumption

China

India

Pakistan

Turkey

Brazil

Bangladesh

Years

Mill

ions

of 4

80 L

b. B

ales

71

72

Interpretation:

In world cotton Consumption, China is leading because of being highest populated country of the

world. So, the demand of cotton is very high in their own country with an average consumption

of 47.5 million 480 lb. bales over the past 4 years. India is following China. Indian cotton

consumption had been increased 7.73 from 2006-07 to 2009-2010. This is because of the

increasing population of India. Turkey, Brazil and Bangladesh are on the 3rd, 4th and 5th place

with an average of 5, 4.5, 3.8 million 480 lb. Bales respectively.

5.5 WORLD IMPORTS SCENARIO:

(Millions of 480 lb. bales) 2006/07 2007/08 2008/09 2009/10

China 10.6 11.5 7.0 10.8

Bangladesh 3.2 3.5 3.8 4.0

Turkey 4.0 3.3 2.9 3.9

Indonesia 2.2 2.3 2.0 2.1

Pakistan 2.3 3.9 2.0 1.7

Thailand 1.9 1.9 1.6 1.8

Vietnam 1.0 1.2 1.2 1.7

Mexico 1.4 1.5 1.3 1.5

South Korea 1.1 1.0 1.0 1.0

Taiwan 1.2 1.0 0.8 0.9

Russia 1.3 1.1 0.7 0.7

India 0.5 0.6 0.8 0.6

73

Egypt 0.5 0.4 0.4 0.6

Hong Kong 0.4 0.4 0.3 0.3

Iran 0.3 0.3 0.3 0.3

2006/07 2007/08 2008/09 2009/100

2

4

6

8

10

12

14

World Cotton Imports

China Bangladesh

Turkey Indonesia

Pakistan Thailand

Vietnam Mexico

South Korea Taiwan

Russia India

Egypt Hong Kong

Iran

Years

Mill

ions

of 48

0Lb.

Bales

Interpretation:

China, the largest producer of cotton in world, is also on the top of the list of imports because of

the increasing demand of cotton in country because of the increasing population. It had increased

8.49 percent from 2006-2006 to June 2010-2011. The rate of increasing is not so much sharp but

in 2008-09, there is a sharp depth of 39.13 percent from previous 2007-08.

Bangladesh, Turkey & Indonesia are following China in imports with average imports of 3.5

million 480 lb. bales.

74

Bangladesh’s imports are increasing day by day because of the increasing demand of textiles

industries. Since, 2006-07, its imports had been increased 34.6 percent.

India is far behind in case of imports. It has an average of 0.62 million 480 lb. bales over the past

4 years.

75

5.6 AREA PRODUCTION AND PRODUCTIVITY OF COTTON IN INDIA DURING LAST TEN YEARS

76

Area, Production and productivity of cotton in India during last ten years

YearArea in lakh

hectaresProduction in lakh

bales of 170 kgsYield kgs per

hectare

2000-01 85.76 140.00 278

2001-02 87.30 158.00 308

2002-03 76.67 136.00 302

2003-04  76.30 179.00 399

2004-05 87.86 243.00 470

2005-06  86.77 244.00 478

2006-07 91.44 280.00 521

2007-08 94.14 307.00 554

2008-09 94.06 290.00 524

2009-10 101.71 292.00 488

Source : Cotton Advisory Board

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-100

20

40

60

80

100

120

85.76 87.3

76.67 76.3

87.86 86.7791.44 94.14 94.06

101.71

Area in Lakh hectares

year

area

Interpretation:

From the above graph it can be inferred that area under cotton cultivation in India has been

increasing continuously since 2000. There is an increase of 18.59 percent in area harvested since

2000 to 2010. But this increment is at very less rate. As demand is increasing and supply is less

this led to increase in prices of cotton.

77

2000-01 2001-02 2002-03 2003-04

2004-05 2005-06

2006-07 2007-08 2008-09 2009-100

50

100

150

200

250

300

350

140158

136

179

243 244280

307290 292

Production in lakh bales of 170 kgs

year

prod

uctio

n

Interpretation:

From the above graph it can be inferred that production has increased for last few years, there is

a Sharp increase of 108.57 percent since 2000-01.

78

2000-01 2001-02 2002-03 2003-04

2004-05 2005-06

2006-07 2007-08 2008-09 2009-100

100

200

300

400

500

600

278308 302

399

470 478521

554524

488

Yield kgs per hectare

year

Yiel

d

Interpretation:

From above graph it can be inferred that increase in the case of yield is 75.53 percent.

So it can be implied that a small increase in area leads to very large increase in production

because of the increase in the yield.

79

5.7

ANNUAL AVERAGE PRICES OF KAPAS FOR IMPORTANT VARIETIES

Prices in Rs. per quintal

YEARBENGAL

DESIJ-34 LRA H-4 S-6 DCH-32

2000-01 1438 2068 2103 2207 2310 2784

2001-02 1833 1828 1750 1891 1901 --

2002-03 1875 2218 2110 2215 2323 2927

2003-04 1962 2591 2470 2533 2632 3152

2004-05 1689 1844 1835 2003 2037 2840

2005-06 1738 1999 -- 2002 2058 4111

2006-07 1871 2133 -- 2168 2280 3034

2007-08 2351 2523 -- 2483 2613 2827

2008-09 3051 2800 -- 2850 2850 --

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-090

500

1000

1500

2000

2500

3000

2310

1901

2323

2632

2037 20582280

26132850

S-6

S-6

Year

price

(Rs./

Qui

ntal

)

Interpretation:

It can be analyzed from the graph that the price of the raw material had risen due to reduction in

the supply of the commodity and increased demand for the same. The rise in the raw material

price is very evident from the demand supply imbalance.

80

5.8 RATES OF THE DOMESTIC COTTON (VARIETY - SHANKER-6)

THROUGHOUT THE YEAR 2009-2010

Date Shanker-6 (PER CANDY)

1/4/2009 22000

15/4/2009 22500

30/4/2009 22500

15/05/2009 23900

30/05/2009 24000

15/06/2009 23500

30/06/2009 23400

15/07/2009 23800

30/07/2009 23300

15/08/2009 23400

30/08/2009 22900

15/09/2009 23200

30/09/2009 22900

15/10/2009 23000

30/10/2009 24000

15/11/2009 24700

30/11/2009 26800

15/12/2009 26900

30/12/2009 27200

15/01/2010 26700

30/01/2010 26000

15/02/2010 27100

28/02/2010 27400

15/03/2010 27900

31/03/2010 28500

Source: Vardhman Polytex LimitedNote: 1 CANDY= 355.62 KG

81

1/4/2

009

15/4/2

009

30/4/2

009

15/05/2

009

30/05/2

009

15/06/2

009

30/06/2

009

15/07/2

009

30/07/2

009

15/08/2

009

30/08/2

009

15/09/2

009

30/09/2

009

15/10/2

009

30/10/2

009

15/11/2

009

30/11/2

009

15/12/2

009

30/12/2

009

15/01/2

010

30/01/2

010

15/02/2

010

28/02/2

010

15/03/2

010

31/03/2

0100

5000

10000

15000

20000

25000

30000

Shanker-6 (PER CANDY)

Year

Price

(Rs./

cand

y)

Interpretation:As it can be analyzed from the graph, the prices of the shanker-6 are not expected to reduce

in short-term span. More or less the pattern has been consistent. More over this analysis is

in time with the current cotton industry scenario, in which various restrictions on exports

are imposed to stabilise domestic market prices.

82

5.9 State-wise Area, Production and Productivity of cotton:Area:

Year

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

State Area Area Area Area Area Area Area Area Area Area

Punjab 4.74 6 4.49 4.52 5.09 5.57 6.07 6.04 5.27 4.96

Haryana 5.55 6.1 5.19 5.26 6.21 5.83 5.3 4.83 4.56 5.07

Rajasthan 5.1 3.47 3.86 3.44 4.38 4.71 3.5 3.69 3.02 4.44

Gujarat 16.15 16.87 16.34 16.47 19.06 19.01 23.9 24.22 23.54 26.24

Maharashtra 30.77 29.8 28 27.66 28.4 28.75 31.07 31.95 31.42 35.03

Madhya

Pradesh 5.06 6.23 5.45 5.91 5.76 6.2 6.39 6.3 6.25 6.46

Andhra

Pradesh 10.22 10.02 8.03 8.37 11.78 10.33 9.72 11.33 13.99 13.19

Karnataka 5.6 5.91 3.93 3.13 5.21 4.13 3.78 4.03 4.08 4.27

Tamil Nadu 1.93 2 0.85 1.03 1.29 1.4 1 0.99 1.09 1.04

Source: Cotton Advisory Board

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

0

5

10

15

20

25

30

35

40Statewise Area Coverage

Punjab

Haryana

Rajasthan

Gujarat

Maharashtra

Madhya Pradesh

Andhra Pradesh

Karnataka

Tamil Nadu

Years

Lak

h H

ecta

res

83

Interpretation:

In the State-wise Area coverage, the cotton Maharashtra is on the top of the list followed by

Gujarat, which makes the production of the north Zone maximum among all zones. Maharashtra

is holding 34.44 percent area of all over India. Andhra Pradesh is also having good share in the

area harvested for cotton production.

Other states like Punjab, Haryana, Rajasthan, Madhya Pradesh etc. have a very small share in

area under cotton production.

84

State wise Production of Cotton for the last ten years:

Years

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

States Prod. Prod. Prod. Prod. Prod. Prod. Prod. Prod. Prod. Prod.

Punjab 9.5 9.25 7.5 10.35 16.5 20 24 20 17.5 14.25

Haryana 10 5.5 8.75 11.5 16.5 13 15 15 14 14.75

Rajasthan 10.75 7 5 9.15 10 11 9 9 7.5 11

Gujarat 23.75 32.5 30.5 50 73 89 103 110 90 98

Maharashtra 18.25 34.25 26 31 52 36 50 62 62 61

Madhya

Pradesh 19.25 20 18 19.65 16 18 19 20 18 14.5

Andhra

Pradesh 25.25 26.75 19.75 27.4 33 32 36 46 53 50

Karnataka 7.75 7 5 4.2 8 6.5 6 8 9 9.5

Tamil Nadu 5.5 5 3 3.75 5.5 5.5 5 4 5 5

Source: Cotton Advisory Board

85

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

0

20

40

60

80

100

120State-wise Production Of Cotton

Punjab

Haryana

Rajasthan

Gujarat

Maharashtra

Madhya Pradesh

Andhra Pradesh

Karnataka

Tamil Nadu

Years

Lak

h B

ales

of 1

70 K

g.

Interpretation:

In the state-wise production of cotton, Gujarat is on the top. As per the report of Cotton

Corporation of India, Share of Gujarat in cotton production in India is 34.02 percent.

Maharashtra being the largest in area harvested holds 2nd position after Gujarat and then comes

Andhra Pradesh.

86

State Wise Yield Data for the Last Ten Years:

 Years

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

State Yield Yield Yield Yield Yield Yield Yield Yield Yield Yield

Punjab 341 262 284 389 551 610 672 563 565 488

Haryana 306 153 287 372 452 379 481 528 522 495

Rajasthan 358 343 220 452 388 397 437 415 422 421

Gujarat 250 328 317 516 651 794 733 772 650 635

Maharash

tra 101 195 158 191 311 213 274 330 335 296

Madhya

Pradesh 647 546 561 565 472 494 505 540 490 382

Andhra

Pradesh 420 454 418 557 469 527 630 690 644 644

Karnatak

a 235 201 216 228 261 268 270 337 375 378

Tamil

Nadu 484 425 600 619 725 668 850 687 780 817

Source: Cotton Advisory Board

87

Punjab11%

Haryana11%

Rajasthan9%

Gujarat14%

Maharashtra6%

Madhya Pradesh8%

Andhra Pradesh14%

Karnataka8%

Tamil Nadu18%

State-wise Share in Yield in 2009-10

Interpretation:

Tamil Nadu is having the highest yield among all other states followed by Andhra Pradesh as per

the statistics of Cotton Corporation of India in 2009-2010. The yield is continuously increasing

day by day since 2000.

88

5.10 COTTON BALANCE SHEET

COTTON BALANCE SHEET

The Cotton Balance Sheet for 2009-10 vis-a-vis 2008-09 as drawn by Cotton Advisory

Board vide its meeting dt.08-04-2010 as under:

Quantity in lakh bales of 170 kgs each

Item 2009-10 2008-09

SUPPLY

Opening stock 71.50 35.50

Crop size 292.00 290.00

Imports 7.00 10.00

TOTAL AVAILABILITY 370.50 335.50

DEMAND

Mill Consumption 207.00 190.00

Small-Mill consumption 23.00 20.00

Non-Mill Consumption 20.00 19.00

TOTAL CONSUMPTION 250.00 229.00

Exports 80.00 35.00

TOTAL DISAPPEARANCE 330.00 264.00

CARRY FORWARD 40.50 71.50

Source: Cotton Advisory Board

Interpretation:

As it can be seen from the table presented above, the demand increased annually. Demand

was 229 lakh bales in year 2008-2009. & it gradually increased to 250 lakh bales in year

2009-10, also exports consumption of Cotton in India has more than doubled, which has

led to Govt. imposing various restrictions in the raw cotton / cotton yarn exports which has

been described further.

89

5.11 RATES OF THE INTERNATIONAL COTTON YARN

THROUGHOUT THE YEAR 2009-2010

DATE COT LOOK INDEX A(US

CENTS PER LBS)

4/1/2009 54.6

16/04/2009 55.4

02/05/2009 59.6

21/05/2009 61.45

02/06/2009 62.7

20/06/2009 61.85

02/07/2009 61.45

14/07/2009 66.15

04/08/2009 63.9

28/08/2009 62.05

02/09/2009 63.55

18/09/2009 62.25

02/10/2009 64.35

21/10/2009 67.4

03/11/2009 69.4

19/11/2009 71.65

02/12/2009 74.85

19/12/2009 78.2

01/01/2010 78.45

18/01/2010 77.25

02/02/2010 75.35

25/02/2010 84.65

04/03/2010 86.05

22/03/2010 86.7

31/03/2010 86

Source: Vardhman Textiles Ltd.

90

4/1/2009

16/04/2009

2/5/2009

21/05/2009

2/6/2009

20/06/2009

2/7/2009

14/07/2009

4/8/2009

28/08/2009

2/9/2009

18/09/2009

2/10/2009

21/10/2009

3/11/2009

19/11/2009

2/12/2009

19/12/2009

1/1/2010

18/01/2010

2/2/2010

25/02/2010

4/3/2010

22/03/2010

31/03/20100

102030405060708090

100

COT LOOK INDEX A

Year

Price

(US

Cent

s per

lbs)

Interpretation:

As it can be analyzed from the graph, the prices of the cot Look Index A are not expected

to reduce in the near future based on the trend of the international cotton prices.

91

5.12 RATES OF THE DOMESTIC COTTON YARN THROUGHOUT

THE YEAR 2009-2010

Date COTTON YARN (COUNT 30)

1/4/2009 120

15/4/2009 125

30/4/2009 124

15/05/2009 129

30/05/2009 130

15/06/2009 130

30/06/2009 128

15/07/2009 130

30/07/2009 130

15/08/2009 130

30/08/2009 130

15/09/2009 126

30/09/2009 126

15/10/2009 126

30/10/2009 130

15/11/2009 135

30/11/2009 140

15/12/2009 153

30/12/2009 153

15/01/2010 153

30/01/2010 160

15/02/2010 154

28/02/2010 155

15/03/2010 152

31/03/2010 170

Source: Vardhman Textiles Ltd.

92

1/4/2009

15/4/2009

30/4/2009

15/05/2009

30/05/2009

15/06/2009

30/06/2009

15/07/2009

30/07/2009

15/08/2009

30/08/2009

15/09/2009

30/09/2009

15/10/2009

30/10/2009

15/11/2009

30/11/2009

15/12/2009

30/12/2009

15/01/2010

30/01/2010

15/02/2010

28/02/2010

15/03/2010

31/03/2010

020406080

100120140160180

COTTON YARN (COUNT 30)

Year

Prie

(Rs./

cone

)

Interpretation:

It can be analyzed from the graph:-

The prices of the cotton yarns are not expected to reduce. The price of the cotton yarn in

domestic market has also shown a constant increasing trend in the prices.

93

5.13 RATES OF THE INTERNATIONAL COTTON YARN

THROUGHOUT THE YEAR 2009-2010

Date COTTON YARN (COUNT 30

USD)

27/03/2009 2.3

17/4/2009 2.28

13/5/2009 2.27

18/05/2009 2.4

19/05/2009 2.32

15/06/2009 2.4

20/06/2009 2.32

22/06/2009 2.32

04/07/2009 2.32

14/07/2009 2.32

18/07/2009 2.32

21/07/2009 2.32

27/08/2009 2.51

21/09/2009 2.51

15/10/2009 2.61

15/11/2009 2.66

30/12/2009 2.81

25/01/2010 3.18

15/02/2010 3.24

11/03/2010 3.3

94

27/03/2

009

17/4/2

009

13/5/2

009

18/05/2

009

19/05/2

009

15/06/2

009

20/06/2

009

22/06/2

009

4/7/2

009

14/07/2

009

18/07/2

009

21/07/2

009

27/08/2

009

21/09/2

009

15/10/2

009

15/11/2

009

30/12/2

009

25/01/2

010

15/02/2

010

11/3/2

0100

0.5

1

1.5

2

2.5

3

3.5

COTTON YARN (COUNT 30 USD)

year

pric

e(in

USD

/con

e)

Interpretation:

It can be analyzed from the graph:-

On the same pattern of domestic and international cotton + domestic cotton yarn, the prices

of the cotton yarns are not expected to reduce. The price of the cotton yarn in international

market has increased continuously over the period of last few years.

95

5.14

World Demand & Supply Situation

Quantity in million Metric tons

Year

Beginning

August 1

03-04 04-05 05-06 06-07 07-08 08-09 09-10*

World

Beginning

stock

10.48 8.71 11.89 12.65 12.91 12.68 12.73

World

Cotton

Production

20.96 27.00 25.68 26.79 26.05 23.42 22.06

World

Cotton

Consumptio

n

21.74 23.58 24.99 26.45 26.39 23.41 24.37

World

Cotton

Exports

7.24 7.75 9.73 8.10 8.36 6.54 7.51

World

Ending

stocks

8.71 11.62 12.65 12.91 12.68 12.73 10.42

As per latest ICAC release dates 3rd may 2010 projected

96

4-Mar 5-Apr 6-May 7-Jun 8-Jul 9-Aug 09-10*0

5

10

15

20

25

30

World Beginning stockWorld Cotton ProductionWorld Cotton ConsumptionWorld Cotton ExportsWorld Ending stocks

Time Period

Qty

in m

illio

n m

etri

c to

nnes

Interpretation:

It can be analyzed from the graph the cotton production came down but the consumption

on the other hand increased, resulting in rise in price in international market. Further, the

exports increased and this led to rise in price in domestic market.

97

5.15

WORLD COTTON PRICES

Monthly average Cotlook A Index (FE) from 2004-05 onwards

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

FE Index in US Cents per lb.

August 51.91 53.23 59.88 66.62 78.04 64.14

September 55.03 53.94 58.82 68.12 77.09 63.99

October 50.89 57.74 57.03 68.93 62.30 66.82

November 47.71 55.87 57.39 69.68 54.96 71.78

December 47.51 56.09 59.43  69.52 55.47 76.78

January 50.23 58.36 59.06  73.21 57.71 77.39

February 48.69 59.66 57.86 75.05 55.21 80.05

March 55.34 57.59 58.42 80.18 51.50 85.80

April 55.99 56.23 57.13 75.44 56.78 88.08

May 54.90 54.35 55.57 74.12 61.95 90.07 

June 52.66 55.14 60.61 77.04 61.39  93.04

July 53.17 55.42 67.84 77.29 64.80 - 

Source: USDA

Interpretation:

As it can be seen from the table presented above, the price of raw cotton increased from

Oct. 2009 in international market.

98

5.16 Government restrictions on raw cotton exports to stabilize prices - 9th

April 2010

India, the world's second largest cotton producer, exported 2.36 million bales (of 170 kg each) of

cotton last season.

Raw cotton prices were ruling at about Rs 28,300 per candy (356 kg) in the month of April 2010

from Rs 22,000 per candy for October 2009. However, ideally prices should not be more than Rs

20,000-22,000 a candy as this year (September 2009-October 2010), cotton production in India is

expected to be about 30 million bales, against 29 million bales last year. The government

restricted exports of raw cotton to cool down prices of the fiber in the domestic market using

various measures as detailed below:

The government had earlier imposed a duty of Rs 2,500 a tonne on raw cotton exports with effect

from April 9, to check the commodity’s price. Besides this, Govt. imposed a three per cent duty

on export of cotton waste.

On July 22, 2008, the Directorate General of Foreign Trade (DGFT) had made it mandatory to

register contracts for cotton exports with the Textiles Commissioner. The Textiles Ministry

suspended the mandatory pre-shipment contracts registration of raw cotton and cotton waste

indefinitely with effect from April 19, 2010, till further orders. The move was aimed at

controlling the rising prices of cotton in the domestic market.

However, the restrictions did not imply on cotton already registered for exports. For the first few

months of the current cotton season (October-September), about 80 lakh bales were already

registered for exports with the Textiles Commissioner.

Due to Govt. putting checks on cotton exports the prices of raw cotton had seen minor correction

in the domestic market. Prices have come down from Rs 30,000 a candy (356 kg), to about Rs

29,000 a candy of cotton. The detailed data is given in below table:

99

Raw Cotton Prices:

RAW

COTTON

BEFORE

(8 April,2010)

AFTER

(15 April,2010)

Difference

Price 29000 28200 800

Table:

BEFORE AFTER Difference0

5000

10000

15000

20000

25000

30000

35000

29000 28200

800

Time Period

Pric

e(Rs

.)

Figure:

100

5.17 Ban on raw cotton exports:

In a late night notification issued on Monday 19 th April 2010, the government suspended

registration of raw cotton export shipments indefinitely. The contracts registered with the

Textiles Commissioner, for countries such as China, Bangladesh, Indonesia and Pakistan, till

April 8, 2010, however, was kept outside the purview of the ban. With a view to putting a check

on the spiralling cotton prices, the Government had earlier imposed export duty of Rs 2,500 a

tonne on raw cotton and three per cent of the free-on-board value of cotton waste. The duty came

into effect from April 9th 2010.

Even while the world production of raw cotton dipped by about five per cent, the production of

raw cotton in the country rose due to a 40-per-cent increase in minimum support price (MSP) of

raw cotton in 2008-09.

The ban on export of raw cotton announced by the Union Government to curb the rise in the

price of the commodity in the domestic market was not showing a significant impact, as export

contracts worth more than 79 lakh bales were already registered with the Textiles Commissioner

before the notification of cotton ban came into effects.

India generally exports up to 8 million bales of raw cotton every year. However, last year i.e.

2009-10, the exports were even low at about 4.2 million bales. Due to Govt. putting checks on

cotton exports the prices of raw cotton had seen minor correction in the domestic market. Prices

have come down from Rs 30,000 a candy (370 kg), to about Rs 28300 a candy of cotton. The

detailed data is given in below table:

101

Affect On Raw Cotton Prices:

COTTON

(Shanker-6)

Rates before ban

(Rs.)

Rates after ban

(Rs.)

Change

(Rs.)

COTTON

(Shanker-6)

28700 per candy 28000 per candy 700

Rate before ban Rate after ban Change0

5000

10000

15000

20000

25000

30000

35000

28700 28000

700

Interpretation:

The immediate effect of Ban on exports of Raw Cotton is easily visible through above

fluctuation in prices of raw Cotton .As it is depicted Above on 19 th April, before the ban,

price was Rs.28700.while After the ban, it came down to Rs.28000.

102

5.18 Effect of ban on cotton exports by Indian Govt. on Other Economies

An Indian ban on cotton exports has forced Pakistani buyers to look for alternative supplies,

traders said on Thursday, and caused prices to soar and endanger the prospects of the country’s

key textile industry.

Pakistani importers have booked orders for 300,000 bales in recent days, after India stopped

registering new contracts for exports from April 19, to control soaring prices, said Naseem

Usman, chairman of the Karachi-based Cotton Brokers Forum.

Cotton spot rates ex-Karachi were quoted at 6,800 Pakistani rupees ($80.95) per maund (37.32

kg) on Wednesday, a rise of 1,200 rupees over the past month or so, according to cotton

officials. “The Indian decision has created a crisis especially for those who delayed the decision

to import and now find themselves in trouble,” Usman said.

Domestic consumption fluctuates between 14 and 16 million bales a year.

With an estimated 12.70 million bales from the 2009/10 crop, Pakistan faces a shortfall of about

3 million bales, and was relying heavily on neighbouring India to meet much of its needs until

late-July, when the new crop will start arriving. Pakistani millers with no cover for the next 2-3

months were now buying from other sources such as West Africa, Central Asia and the US

dealers said.

Most supplies would likely come from West Africa, which is still attractive price-wise, another

trader, Ayub Usman, said from Faisalabad, a city known as Pakistan’s textile capital.

World 2009/10 cotton ending stocks will slump almost 20 per cent year-on-year because of

lower output in top consumer China and increased consumption in India and Turkey among

others, according to influential industry analyst Cotlook.

103

5.19 Govt. decision to control cotton yarn exports

Cotton yarn spinners and exporters came down heavily on the Government's decision to control

the export of cotton yarn by announcing registration of cotton yarn exports with immediate effect

and imposition of prohibitive duty on export of the same.

The cotton yarn spinners and exporters criticized the Government's decision to control the export

of cotton yarn. In a dramatic move, the Government withdrew the 7.67% concession (exports

benefit) given to cotton yarn exporters under the Duty Entitlement Pass Book (DEPB) scheme

vide notification dated 21.04.2010, in a bid to rein in the prices of the textile product, which has

shot up abnormally in recent months, which exasperated the apparel exporters. The decision was

aimed at reducing the exporters’ margin by taking away the benefit.

Similarly, the Government withdrew the 4% concession (exports benefit) given to cotton yarn

exporters under the Duty Drawback Scheme vide notification dated 29.04.2010.

In order to moderate the yarn prices in the domestic market, the Central Government came out

with measures including suspension of various exports benefit available for cotton yarn exports,

imposing a prohibitive duty on the export of raw cotton and introduction of a mechanism for

registration of cotton yarn contracts. This has certainly led to some reduction in the average rates

of the cotton yarn available for domestic market as due to the various restrictions exercised by

Govt. the supply of cotton yarn for exports has reduced leading to supply being available for

domestic market.

Further, the cotton yarn manufacturers have committed to Govt. that on an average the prices of

cotton yarn in the domestic market will be reduced by at least Rs. 5/- per kg. in the short run and

Rs. 10-15/- in the long run.

104

5.20 PRIMARY DATA ANALYSIS & INTERPRETATION:

1) Table: shows the source of supply of raw cotton

response no.of respondents percentage

direct from the farmers 1 10

from intermediaries/middlemen 9 90

(Graph 1)

direct from the farmers from intermediaries/middlemen0

10

20

30

40

50

60

70

80

90

100

source

No. o

f Res

pond

ents

Interpretation:

From the above graph it shows that 90% of the raw cotton is supplied by

intermediaries/middlemen and only 10% is supplied directly by the farmers to the suppliers of

Vardhman.

105

2) Table: shows, whether prices are manipulated by the farmers or not

response No. of respondents contribution mean score

strongly agree(5) 1 5

3.1

agree(4) 2 8

neutral(3) 4 12

disagree(2) 3 6

strongly disagree(1) 0 0

Interpretation:

Above table shows that the suppliers are neutral on the view point of price manipulation by the

farmers, as mean score, shown above, is 3.1.

106

3) Table: shows the causes of fluctuation in raw cotton prices

response no. of respondents %age of respondents

global demand & supply 5 50%

local demand & supply 7 70%

currency fluctuation 5 50%

power generation 3 30%

irrigation & farming facilities 6 60%

government policies & subsidies 7 70%

yarn demand 1 10%

(Graph 2)

global

deman

d & su

pply

local dem

and &

supply

curre

ncy fluctu

ation

power gen

eration

irriga

tion & fa

rming f

aciliti

es

gove

rnmen

t polici

es & su

bsidies

yarn dem

and

01234567

5

7

5

3

67

1

Factors

No.

of R

espo

nden

ts

Interpretation:

Above graph shows that 7 out of 10 suppliers are of view that local demand & supply and govt.

policies & subsidies are the main causes of fluctuations in raw cotton prices, where as 6 out of 10

suppliers are of view that causes are irrigation & farming facilities.

107

4) Table: shows prices are fallen below minimum support price.

response no.of respondents %age of respondents

yes 3 30

no 7 70

(Graph 3)

yes no0

1

2

3

4

5

6

7

3

7

Response

No. o

f Res

pond

ents

Interpretation:

From above graph it is shown that 70% of suppliers are view point that cotton prices have not

fallen below minimum support price.

108

5) Table: shows environment which affects on cotton prices.

Response no.of respondents %age of respondents

political 4 16

social 2 8

biological 9 36

labor 4 16

Land 6 24

(Graph 4)

political16%

social8%

biological36%

labor16%

land24%

Interpretation:

Above chart shows that the major environment which affects the cotton prices is biological

environment which is 36% and least affecting environment is social.

6) Table: shows basis on which customer buys the product.

109

Response no. of respondents (n=10) %age of respondents

price 6 27

quality 10 46

on time delivery 6 27

(Graph 5)

price27%

quality45%

on time delivery27%

Interpretation:

It can be analyzed from the above chart quality is the major factor to buy the product by the

customers, whereas on time delivery and price are equal factors responsible for buying the

product.

110

7) Table: shows demand of raw cotton in current season.

response no. of respondents (n=10) %age of respondents

stable 2 20%

fluctuating 4 40%

increasing 4 40%

decreasing 0 0%

(Graph 6)

stable20%

fluctuating40%

increasing40%

Interpretation:

From the above chart it can be analyzed that demand of raw cotton is fluctuating in current

season which is 40%.

111

8) Table: shows time period of maximum supply of raw cotton.

response no. of respondents %age of respondents

seasonal 9 90

regular 1 10

often 0 0

(Graph 7)

seasonal regular often0

1

2

3

4

5

6

7

8

9

9

1

0

Time Period

No.o

f Res

pond

ents

Interpretation:

Above graph shows that 90% of respondents believe that in seasonal period supply of cotton is

maximum, whereas only 10% respondents believe that supply of cotton remains constant

regularly.

112

9) Table: shows whether the cotton development programs are conducted.

response no. of respondents %age of respondents

yes 9 90

no 1 10

(Graph 8)

90%

10%

yes no

Interpretation:

Above graph shows that 90% respondents says that cotton development programs are conducted.

113

10) Table: whether cotton development programs are beneficial for promoting the cotton

industry.

response no. of respondents %age of respondents

yes 9 90

no 1 10

(Graph 9)

90%

10%

yes no

Interpretation:

As above graph shows that 90% respondent believe that cotton development programs are

beneficial for promoting the industry.

114

11) Table: shows whether recession affect on cotton prices.

response No. of respondents %age of respondents

yes 10 100

no 0 0

(Graph 10)

yes no

0

2

4

6

8

10

12

10

0

Interpretation:

Above graph shows that 100% respondents agree that recession has affected on cotton prices.

115

12) Table: shows to what extent recession affected the prices of cotton.

response no. of respondents contribution mean score

very largely(5) 1 5

4.1

largely(4) 9 36

neutral(3) 0 0

less(2) 0 0

very less(1) 0 0

Interpretation:

Above table shows that recession has largely affected on cotton prices as mean score is 4.1.

13) Table: shows the opinion of suppliers in context of fluctuation of cotton price in future.

response no. of respondents contribution mean score

strongly agree(5) 1 5

3.9

agree(4) 7 28

neutral(3) 2 6

disagree(2) 0 0

strongly disagree(1) 0 0

Interpretation:

As above table shows that cotton prices will fluctuate in future as mean score is 3.9 which is

towards the agree statement.

CHAPETR- 6

116

6.1 FINDINGS:

1) The total cultivated land came down due to a delayed monsoon. Cotton exports are freely

allowed, and rightly so, this makes domestic cotton prices follow international prices. Cotton

accounts for 65-70 per cent of the yarn cost and a 35 per cent increase in cotton prices means a

20 per cent increase in yarn prices.

2) Power constitutes the second most important element of cost; this has gone up by 30- 40 per

cent due to power cuts and the need to buy power from the open market or generate it using

liquid fuels. For mills that pay the full cost of power, it accounts for 15 per cent of the yarn cost

in normal conditions; in today's situation, it is as high as 20-21 per cent.

3) Labor costs have gone up as mills are forced to pay a wage much higher than NREGA

(National Rural Employment Guarantee Act) to get workforce. Most mills are forced to pay

daily wages of over Rs 200, against Rs 110-120 that they were paying earlier. Wages have gone

up from 4 per cent of costs to 6 per cent now. Mills are rapidly adopting technology to reduce

worker dependence.

4) The profitability of mills was minus 7-8 per cent during the last 18 months, one of the reasons

being the incentive for cotton exports. Profitability has moved up to 5 per cent, notwithstanding

the good price realization in yarn, on account of high input costs.

5) Various factors, such as gas shortage in Bangladesh, political instability in Pakistan, no revival

of closed capacity during the last 18 months and labor shortage in China, will ensure that global

yarn prices will move north for some time to come, till new capacity is created.

6) There is going to be an increased shortage of yarn in days to come, as the per capita consumption

of textiles in both India and China is growing rapidly with the per capita income.

7) Biological factors are considered as the most important factors which influence cotton prices.

8) Demand is fluctuating as the prices are not stable and in future prices are lightly to rise.

117

6.2 FACTORS WHICH INFUENCE THE MARKET

1. Opening Stock

2. Production

3. Consumption

4. Exports & Imports

5. Minimum Support Price

1. OPENING STOCK: -

Opening Stock is the stock of the fibre in the beginning of the cotton season. Logically the

opening stock position will affect the price in the market. Stock position effects perception of the

buyer and seller. The price should depend upon the Opening Stock position of the Commodity. If

the opening stock is going down the there should be bullish trend on the prices. However, if we

see the world ending stock since 2005-06 there is no big change in the same except for the year

2009-10. But the price of the fibre has moved upwards consistently.

2. PRODUCTION: -

Production is act of manufacturing goods. After analyzing the table, it has been found that

worldwide production dropped was 10% in 2007-08 and Consumption Dropped was 10%.But

the difference between in consumption pattern of china is going up and it is subsidized the

import and this shortage fulfilled by India and U.S. Major gap of production & consumption of

china is 32%.The total consumption of china is 40% of the world consumption.

3. CONSUMPTION: -

Textile Industries more or less closed down by 50% in European Countries because of the social

responsibility of labour and insurance commitment. In European Countries, labour cost per hour

is €12-14 as compared to Rs.135 per eight hour in India. There is lot of difference between two

countries. So that’s why Europe, USA Stores like Old Navy, Spencer, Wall mart Have shifter

their garments orders to Bangladesh, India, Pakistan and China.

118

4. EXPORT AND IMPORT: -

As we have seen in the Export annexure of Export data of the world, we found that United States

is the single largest Cotton Exporter Country in the world, so they can manipulates the markets.

Government of U.S.A very supports the farmer by giving them subsidy so the farmer can’t affect

by the market fluctuation. They have loan account where farmer put their Cotton at guarantee

price by the government. If the prices falls below the guarantee prices then the American

government bears the losses. If the prices go above the guarantee prices and then advantages

goes to the farmers.

5. MINIMUM SUPPORT PRICE: -

Minimum price for a product, established by the government and support by payments to

producers in the events that the market price falls below the specified minimum price.

119

CHAPTER- 7

CONCLUSION

From the study it is concluded that government restrictions played a vital role in controlling the

cotton and cotton yarn prices. In order to control the rising in international export of cotton yarn,

government had to impose restrictions, which resulted in fall in price. Study also concludes that

there will be rise in cotton prices in future as well. Biological factors and other factors have also

been responsible for fluctuation in prices of cotton.

120

CHAPTER 8

BIBLIOGRAPHY

Ge Yuanlong, Wang H.Holly, Ahn Sang, “Cotton market integration and the impact of China's

new exchange rate regime” 10 MAY 2010 http://onlinelibrary.wiley.com/doi/10.1111/j.1574-

0864.2005.00415.x/abstract

Keef Stephen, Zhu Hui, “The Monday effect in U.S. cotton prices” 17 JUL 2009

http://onlinelibrary.wiley.com/doi/10.1111/j.1574-0862.2010.00456.x/abstract

Acajou “Textiles 2008: Blueprint For Survival”Textile World. Atlanta: Jan/Feb 2008.

Vol. 158, Iss. 1; pg. 22, 9 pgs http://proquest.umi.com/pqdweb?index

Athalye, ” The Global Textile and Clothing Industry post the Agreement on Textiles and

Clothing” World Trade Organization Geneva, Switzerland.

Gupta,”India, US set to explore textile market.” Knight Ridder Tribune Business News.

Washington: Mar 8, 2006. Pg

http://proquest.umi.com/pqdweb?

did=999480491&sid=5&Fmt=3&clientId=129893&RQT=309&Name=PQD

Curran, “China Will Limit Textile Exports Amid Trade Rift” Wall Street Journal. (Eastern

edition). New York, N.Y.: Jun 21, 2005.pg. A.14

http://proquest.umi.com/pqdweb?

did=856486841&sid=1&Fmt=2&clientId=129893&RQT=309&VName=PQD

Ray, “Effective supply value chain based on competence success” Supply Chain

Management. Bradford: 2010. Vol. 15, Iss. 2; pg. 129 http://proquest.umi.com/pqdweb?index

Anderson, Valenzuela, “Protection has a price”Far Eastern Economic Review. Hong Kong:

Aug 29, 1996. Vol. 159, Iss. 35; pg. 44, 1 pgs

http://proquest.umi.com/pqdweb?

did=10139722&sid=3&Fmt=2&clientId=129893&RQT=309&VName=PQD

http://www.vardhman.com/annual-report-textiles08-09.pdf

121

http://www.vardhman.com/annual-report-textiles07-08.pdf

http://www.vardhman.com/annual-report-textiles09-10.pdf

http://www.vardhman.com/investor_financialperformance.asp

http://texprocil.com/cotton.htm

http://www.indiantextilejournal.com/articles/FAdetails.asp?id=2737

http://textilescommittee.nic.in/backround.html

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http://www.cotcorp.gov.in/current_cotton.asp#world

http://www.cotlook.com/index2.php

http://www.cottonusa.org/files/economicData/CottonWMT-JUNE-2010.pdf

http://www.dailytimes.com.pk/default.asp?page=2010\05\12\story_12-5-2010_pg5_13

http://www.hindu.com/2010/04/23/stories/2010042361371700.htm

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5784295.cms

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http://en.wikipedia.org/w/index.php?title=Special

%3ASearch&redirs=0&search=definition+of+fluctuation&fulltext=Search&ns0=1

122

SCHEDULE

Name:

Occupation:

Address:

Contact No.:

Q1) From where do you get raw cotton?

Direct from farmers

From intermediaries or middlemen

Q2) Do you think that price is manipulated by the farmers?

Strongly agree

Agree

Neither agrees nor disagrees

Disagree

Strongly disagree

Q3) What according to you are causes of fluctuations of raw cotton?

Global demand & supply

Local demand and supply

Currency fluctuation

Power generation

123

Irrigation and farming facilities

Government policies & subsidies

Yarn demand

Q4) Have the prices of cotton fallen below the minimum support price in the state during the current season?

Yes

No

Q5) Which of the following environment largely affects cotton prices?

Political

Social & cultural

Biological

Labor

Land

Q6) On what basis your customers buy your product?

Price

Quality

On time delivery

124

Q7) What is the demand of cotton in current season?

Stable

Fluctuating

Increasing

Declining

Q8) When is your supply maximum?

Seasonal

Regular

Often

Q9) Are there any cotton development programs to promote the industry?

Yes

No

Q10) If yes, then its beneficial?

Yes

No

125

Q11) Has recession affected on the prices of cotton?

Yes

No

Q12) If yes then to what extent?

Very large

Large

Neutral

Small

Very small

Q13) Do you think that prices of cotton will fluctuate in future?

Strongly agree

Agree

Neither agrees nor disagrees

Disagree

Strongly disagree

126