Textile mills across the country stopped production on Monday to protest the withdrawal of the incentives by the government and the curbs on cotton exports, which they say lead to massive losses.

The strike was called by the Confederation of Indian Textile Industry (CITI). The Rs.70,000-crore cotton spinning industry, employing more than seven lakh workers and exporting nearly $3 billion worth of yarn a year, came to a grinding halt.

In a statement here, CITI chairman Shishir Jaipuria said the closure was complete all over the country. The mills would be idling one-third of their capacity from Tuesday.

A virtual ban on cotton yarn exports for more than two months in the past quarter and the declining domestic demand had resulted in a huge unsold stock of cotton yarn accumulating in the mills, he said. “When exports were allowed from April 2011, the accumulated stock caused a crash of cotton yarn prices in the global and domestic markets. Consumers shied away from the markets because of their perception that prices would decline further, since mills were flush with stocks and have to unload them at any cost,” he said.

With a share of more than 25 per cent in the world market, Indian supplies were crucial to the global cotton yarn prices. The curtailing of production through a full closure on May 23 and the one-third closure from May 24 is expected to reduce stocks to some extent, he said.

Mr. Jaipuria said the excise duty of 10.3 per cent imposed on the garment industry in this year's budget and the recent legal action against hundreds of dyeing units in Tirupur had created serious problems for the industry. In turn, this was affecting the consumption of both yarn and fabrics. Restoration of the drawback facility for cotton yarn exports, he said, would be the most important step the government should take to ease the crisis.

CITI secretary-general D.K. Nair said nearly 3,000 mills took part in the strike.

Reports said most of the nearly 2,000 textile mills in Tamil Nadu stopped production.

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