December 4, 2020: Cotton exports are likely to jump 40% in 2020-21 to 7 million bales, the highest in seven years, as depreciation of the rupee and a rally in global prices have allowed exporters to clinch contracts. India had exported nearly 50 lakh bales in the previous season.
Yarn exports, however, are declining. Senior officials from the South India Mills Association (SIMA) said exports of cotton yarn reached its peak in 2013-14 (1,313.43 million kg), after which it sharply declined. During 2019-20, exports further fell to 959 million kg, primarily because of absence of incentives, which were given to the sector earlier.
“The lockdown caused by the COVID-19 pandemic in India and across the globe from mid-March 2020 has created an unprecedented crisis. This will undoubtedly have a very serious impact on the Indian cotton textiles and clothing industry, thereby affecting cotton demand. This would also have very serious impact on the CCI that has a stock over 100 lakh bales procured under the MSP during the current cotton season at prices much higher than current market prices,” Dr K Selvaraju, secretary general, SIMA, said, declining to speculate on the 2020-21 yarn export figures.
Kapas prices are currently in the Rs 5,500-5,600 range, while the MSP for cotton is currently at Rs 5,800 per quintal.
Selvaraju said the cotton yarn spinning sector is completely dependent on production and prices of cotton. “Over the past few years, not only production of cotton decreased in India, but also its prices have increased. Cotton production in India has reduced from 398 lakh bales in 2013-14 to 357 lakh bales in 2019-20. Prices of raw cotton increased by over 10% during the period. This has put considerable burden on the spinning industry. Price increase in cotton yarn has not been sufficient enough to match the increasing cost of raw materials and highly fluctuating cotton prices,” he pointed out.
India’s domestic consumption of cotton yarn is well below its production and its exports are also declining (from 1,313.43 million kg in 2013-14 to 959.79 million kg 2019-20 at a CAGR of about (-) 3%), he said. Both low domestic consumption and decline in exports are leading to surplus production of cotton yarn in the country, which is harming the spinning industry, Selvaraju pointed out.
Significantly, the share of Vietnam in China’s total imports of cotton yarn has increased from 7.61% in 2009 to 36.66% in 2018, while that of India has increased from 7.75% to 21.74% during the same period, he said.
India also faces duty challenges in export markets vis-à-vis competing countries. Pakistan and Bangladesh levy higher rates of duty on Indian yarn, while they enjoy duty free or concessional duty access in India. India is lagging in cotton exports to major markets due to a duty disadvantage vis-a-vis Bangladesh, Vietnam and Pakistan. Countries like Bangladesh and Vietnam enjoy duty-free access in world’s largest cotton yarn markets such as China while Indian exporters have to pay duties.
Source: Financial Express
