HOSEX (FOHMA Hosiery Cost Index)
METHODOLOGY FOR CREATION OF THE INDEX:
Understandably, it is very difficult to approximate the costing of all hosiery products. However at FOHMA we felt that something is better than nothing, and therefore took up 5 basic products which cover a large percentage of hosiery sales – men vests, men inner elastic drawer, men top elastic brief, ladies’ panty and socks. Further we have taken the costing of Tirupur for vests and panty; costing of Kolkata for briefs and drawers; and costing of Delhi for socks.This will thus form the representative product basket for the index.Hence, the major Hosiery Centres of India are represented in this Index.
Based on estimated relative market share of the products taken, we have assigned following weightages to the products – Vest (40%), Inner elastic drawer (20%), Outer elastic drawer (20%), Ladies Panty (15%) and Socks (5%).
Furthermore, in addition to fabric & production costs, basic packing costs have been taken in the calculation as they are a very integral part of a product. All costings are before tax and outward freight i.e. ex-factory. It doesn’t include fixed /allocable costs like interest, rent and depreciation. Hence, the index captures relative pricing on account of fluctuations in the variable cost of the product.It is assumed that fixed cost would be in a narrow percentage range of the variable cost. This would mean that index may need revision in the event of major changes in the macro conditions and mode of production to adjust for significant changes in fixed costs. Any significant change in consumption pattern may also lead to alteration in the representative product basket.
The base date for the index is January 1, 2010. The reason for taking the same is that it marks the start of a decade and is between 2 abnormal pricing periods i.e. 2008-9 when the global recession happened and 2011-12 when cotton touched a historical high. Hence the base date taken is for a relatively moderate period and would be a fairly normalised cost period.
The index would be published in the start of every quarter based on costs at the start of each quarter i.e. Jan 1, April 1, July 1, and October 1. However as the launch is being coincided with the Annual General Meeting of FOHMA on 21stSeptember, 2015, the index is being launched as based on September 1, 2015 data.The file with all the calculations of Index announced, shall be maintained by FOHMA as a supporting document.
This Index calculation/validation shall be done by Mr. Sanjay K Jain, Vice President FOHMA - Central. He shall continue to do the same for a minimum period of one year, after which FOHMA Committee would decide on the modus and person responsible to maintain the index.
Zonac Knitting (Bonjour Socks Brand) will provide socks costing data and T T Ltd will provide cost data of undergarments.
LIMITATIONS: • Cost index is indicative in nature and is to be used as a mere guiding force.
• Index just indicates the relative/percentage movement in costs – it is not absolute in nature.
• A lot depends on the way we chose our representative product basket and there will always be scope to argue on whether the basket is actually representative.
• Similarly, the choice of base year will also effect the indices calculated.
• Because of the averaging procedure, only gradual movements are captured. Sudden and drastic movements in a single product/input may not be truly represented.
DISSEMINATION OF THE INDEX:
The FOHMA Hosiery Cost Index shall be launched on September 21, 2015 at the FOHMA AGM in the presence of industry stalwarts.
The Index launch will be advised to the industry by a press release to be circulated to all textile magazines and other prominent business publications. Details of the same will also be circulated to all industry associations.
Every quarter the same will be circulated and disseminated via press/media and textile industry associations.
The HOSEX as on January 01, 2016 is 130.09 against 131.39 on September 1, 2015. The main reason for the marginal fall in the Cost Index is the drop in cotton yarn prices in the last 4 months. Other parameters have stayed almost stable.