Claiming that cotton import duty is eroding global competitiveness, Southern India Mills Association (SIMA) Tuesday urged Prime Minister to remove the 11 per cent import duty on cotton and cotton waste and also cotton from MCX and NCDEX features as recently done for certain agricultural products to avoid further speculation.
Though the government took several proactive policy initiatives to address the structural issues on the tax front, raw materials and tariff barriers to enhance the global competitiveness of various manufacturing sectors, especially textile industry, the only negative step that the government brought in was the levy of 5 per cent basic custom duty and 5 per cent Agricultural Infrastructure Development Cess and 10 per cent social welfare cess on both totalling 11 per cent on cotton imports in the 2021-22 Budget.
The industry immediately requested the government to roll back the decision as it has been importing only 4 to 5 per cent of the cotton consumed by the industry that are not produced by the Indian farmers, SIMA chairman Ravi Sam said in a release here.
Occasionally, the industry opted for imports only during off season when there is a shortage, or the domestic cotton price is much higher than the international price. Thus, the industry had a level playing field.
Therefore, the removal of 11 per cent import duty on cotton and cotton waste will not affect the Indian cotton farmers, he said.
During the cotton season 2021-22, though the season started with comfortable opening stock of 75 lakh bales and estimated crop of 360 lakhs bales, the cotton prices started skyrocketing from the beginning of the season owing to the unprecedented volatility in international cotton prices.
There was a pent-up demand for the cotton in the post-COVID period and the Indian cotton textile industry all along had home grown cotton advantage as the cotton would be cheaper by 5 to 10 per cent during the cotton season (December to March) and remained globally competitive, he said adding that the seed cotton price started surging from the beginning of the season.
The average price of Gujarat Shankar-6 cotton that prevailed at Rs.6,788 per quintal on October last has now increased to Rs.8,930 while good quality kapas price has increased from Rs 7,575 to Rs.10,760, he pointed out.
The SIMA chairman said quality cotton is not available in the market and the premium for the same is 5 to 7 per cent higher and the mills are finding it difficult to procure cotton even for the day-to-day use, as the farmers anticipate a further hike in cotton prices and cautioned that the cotton textile value chain might come to a grinding halt in the coming months if the import duty on cotton is not removed immediately.
Source : Business Standard
