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Cost hikes cripple Surat


First, the withdrawal of high-value currency notes paralysed Surat as its economy is largely cash-based involving small processors and migrant employees.

Then GST rendered a big blow to textile processors, whose cost increased sharply along with compliance burden.

As if this were not enough, polyester yarn prices increased six to eight per cent in the past one month and 12 to 15 per cent in the past three months.

The total cost increase since January has been put at over 30 per cent. This is happening at a time when fabric demand is low. Demand is expected to revive only when the festive season begins a few months later.

Shifts in Surat power loom co-operatives have been reduced. This has led to a fall in production. It is estimated that post GST, there has been a fall in Surat synthetic fabric production by a third.

Since yarn is not woven, and fabric is not produced, job workers do not have much processing work.

Following the rise in crude oil prices, prices of petrochemicals are also rising. These are raw materials for producing polyester yarn used by Surat-based power looms.

Power looms have another problem. Synthetic fabric has five per cent GST but yarn attracts 12 per cent GST. This means that when selling fabrics loom units will not be able to claim full GST paid of yarn and hence a huge amount of unused tax credit will remain in their books.

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