The leaders of CITI and SIMA stated that the Government's decision had come at the right time and it would protect the interests of both the farmers and the industry.
In the Union Budget 2021-22, the Government announced a levy of 11 percent import duty (5 percent BCD, 5 percent AIDC and 10 percent Social Welfare Surcharge on both) to protect the interest of the farmers.
Earlier, the Cotton Corporation of India (CCI) had to procure around 200 lakh bales of cotton during the cotton seasons 2019-20 and 2020-21 owing to the prolonged Covid pandemic lockdown across the world and in India. The Government had to allocate Rs.17,682 crores to compensate the losses incurred by CCI for exercising MSP operation.
In the post-COVID period even during the second wave, owing to pent-up demand, US sanction on Xingang province cotton (that accounts for 10 percent of the world cotton production), the cotton prices started increasing steeply from Rs.38,000 per candy of 355 kgs to Rs.45,000 per candy when the import duty was levied, and currently the price is ruling over Rs.90,000 per candy of 355 kgs.
With the reduction in cotton production during the current season and increased consumption, the industry is likely to face 40 to 50 lakh bales cotton shortage and demanded for the removal of import duty till the end of the season to sustain its performance, avoid production stoppage and job loss. The industry started facing cancellation of export orders owing to steep increase in cotton prices. The Indian cotton price is costlier by 7 to 10 percent due to the import duty.
Under this scenario, competing nations started grabbing the export market opportunities of India. For example, India’s share in US bedlinen exports declined from an average of 55 percent during 2021 to 44.85 percent in the month of January 2022 only. While Pakistan’s share increased to 25.71 percent from 20 percent and China’s share increased to 19.37 percent from 12 pe3rcent during the same period. Therefore, the industry has been demanding the Government to remove the import duty levied on cotton.
In a joint press release issued in Coimbatore on Thursday, T Rajkumar, Chairman, Confederation of Indian Textile Industry (CITI), New Delhi and Ravi Sam, Chairman, the Southern India Mills’ Association (SIMA) thanked the Indian Prime Minister Narendra Modi, the Minister of Finance Nirmala Sitharaman, the Minister of Textiles Piyush Goyal and the Minister of Agriculture Narendra Singh Tomar for considering the urgent need of the industry and scrapping the import duty and all cesses on imported cotton.
They also thanked the Chief Minister of Tamilnadu, M K Stalin and the Minister for Handlooms & Textiles R Gandhi for writing a series of DO letters urging the Union Government to remove the import duty on cotton to sustain the performance of the industry in Tamilnadu. The duo stated that the Government's decision has come at the right time and it would protect the interests of both the farmers and the industry. They also stated that the farmers were able to earn record incomes by taking advantage of the steep increase in international and domestic cotton prices during the current season.
They have said that as the farmers have sold their cotton and started preparing for sowing for the next season, the removal of import duty till September 30, 2022 will not harm the farmers. They have added that few traders and ginners have been hoarding the cotton and speculating the prices, and this would be discouraged from April 14, 2022 since the industry can start importing the cotton even from the neighbouring transhipment ports like Tuticorin, Colombo, Dubai and Malaysia.
Both industry leaders stated that as the new international cotton season would begin in August, the industry would be in a position to sustain its performance with the proactive initiative taken by the Government. They strongly felt that in the short run, there might be some increase in the international price, but the domestic cotton price would soon decline, match with the international price and create a level playing field.
Owing to the import duty, the industry had been planning for stoppage of production from 15 percent to 30 percent as the domestic cotton prices were not viable and MSME spinning mills could not buy any cotton in the open market even at a higher price.
The CITI & SIMA leaders also reiterated that they were thankful to the Government for avoiding an irreparable crisis for the industry by taking the decision of scrapping the import duty at the right time.