Cotton futures are not beneficial to yarn traders, says Jaykrishna D Pathak, president of the Bombay Yarn Merchants Association & Exchange, in an exclusive interview with Business Standard. Excerpts:

What is the status of the yarn trade?

Texturised yarn business is booming on the back of good domestic and export demand. At least 150 texturising machines are being imported in the next three months, as exports have turned attractive, owing to certain incentives.

Even raw material prices are reasonable, although leading manufacturers have discontinued discounts from April. Even weavers are making money. Many second-line spinners are in a position to import raw materials if local prices  are high.

Hence, there is no monopolistic situation. We have also reduced bad debts in the trade through arbitration at the association level.

But the problem of yarn traders is most manufacturers are now approaching consumers directly. Traders are, thus, losing business. It will be just to say that yarn traders are struggling to earn their commission.

Has the absence of VAT on textiles had any effect on the yarn business?

We were all expecting VAT on textiles from April, but it has not happened. Today, there is VAT on yarns, garments and made-ups. Absence of VAT on textiles leaves the VAT chain incomplete.

VAT on textiles will help garment manufacturers, as they will be able to claim credit on the VAT paid in previous stages on manufacturing up to the textiles stage. We hope textiles will be covered under VAT from the next financial year.

Do you think futures trading will help the yarn industry?

As far as cotton yarn is concerned, cotton futures are already traded, but yarn traders cannot benefit from it because of low traded volumes. We understand that even manufacturers too are not getting any benefit from cotton futures.

What is the condition of the yarn market?

In the cotton yarn segment, coarse yarns are doing well. Cotton prices have gone up by an average of 5 per cent in the last month. In polyester viscose yarns, leading manufacturer Grasim Industries has raised prices by Rs 3.50 from April and, as a result, prices of PV yarns have gone up.

Polyester fibre manufacturers have not raised the prices, while prices of polyester cotton yarn are steady.