SIMA (The Southern India Mills’ Association) : REVIEW DUTY ON COTTON IMPORTS

08 January 2022, Mumbai:

The government recently took some bold steps to address tax and raw material issues in the textile industry. First, it brought the entire textile value chain under GST net and also removed the anti-dumping duties on polyester raw materials, polyester fiber and acrylic fiber.

Further, it introduced the RoDTEP scheme to refund the applicable and embedded taxes apart from extending duty drawback benefits to refund all the taxes and levies and thereby enhance global competitiveness.

Another important decision is the introduction of 5 per cent BCD, 5 per cent AIDC and 10 per cent social welfare cess on both totaling 11 per cent on cotton imports in the Union Budget 2021-22.

However, the industry immediately protested against this and urged the government to roll back its decision as it imports only 5 per cent of the total cotton consumed by the industry.

International volatility leads to spike in domestic prices

In cotton season 2021-22, India’s opening stock stood at 75 lakh bales while estimated crop reached 360 lakhs bales.

Unprecedented volatility inIndia Review duty on cotton imports urges international cotton prices led to the skyrocketing of domestic prices while pent up demand in the post-COVID period led to skyrocketing prices.

The situation was further stimulated by the US sanctions on Xinjian cotton that accounts 10 per cent of the world cotton production. Dominated by large traders, the Indian Commodity Markets MCX and NCDEX also fuelled the market.

Ravi Sam, Chairman, The Southern India Mills’ Association states, the Indian cotton textile industry was at an advantage as cotton prices reduced by around 10 per cent during the cotton season -- from December to March.

Prices of cotton seed surged from the beginning of the season. Price of Gujarat Shankar-6 cotton increased to Rs 8,930 from Rs 6,788 per quintal on October 1, 2021 while prices of good quality kapas increased from Rs 7,575 to Rs 10,760.

Import duty erodes market competitiveness For the first time, Indian cotton price zoomed ahead of in

ternational prices due to the imposition of import duty on cotton which eroded market competitiveness of the exporters.

Price of Indian cotton price increased by Rs 10 to Rs 15 per kg for the last two months and the situation is likely to aggravate. Due to this, exporters have been unable to confirm export orders usually finalized during the December-January period, leading to the diversification of orders to competing nations.

The premium of good quality cotton is 5 to 7 per cent higher than low quality cotton. Due to this, mills have been unable to procure this cotton even for the daily use, posing a huge threat to the entire textile value chain.

Therefore, SIMA urges the government to remove the 11 per cent import duty on cotton and cotton waste and also remove cotton from MCX and NCDEX features.

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