Industry cries foul over move to hike import duty on cotton

S Venkitachalam

New Delhi, Dec 6: The textile sector, already reeling under the impact of the ongoing global slump, is up in arms against the agriculture ministry’s move to raise the import duty on cotton, saying it will result in closure of more mills, adversely affecting exports as also the employment scenario. At present, imported cotton, allowed under open general licence since 1994, attracts a customs duty of 5.5 per cent.

Industry sources say they do not see any justification behind the move as it has come at a time when the local cotton prices are almost 20 per cent higher than those prevailing in the international market, thus greatly benefiting the farmers.

The other important factors, according to them, are the comfortable cotton situation in the country this year. The Cotton Advisory Board, which met in Mumbai last week, had noted that cotton output would be 16 lakh bales up at 156 lakh bales this season from the past year’s levels. Further, the board predicted that cotton imports estimated at 16 lakh bales would be down from 22 lakh bales last season. In addition to this, the closing stock at the end of the current season is placed at 26 lakh bales against 29 lakh bales last season, ruling out any stockpile and distress sale.

Cotton accounts for over 74 per cent of fibre consumption in the country against 42 per cent in the world over. The country also has the world’s largest spinning capacity for cotton yarn and is also the largest cotton yarn exporter. The industry is thus is highly dependent on cotton. The high domestic prices have made exports uncompetitive, though the government continues to encourage exports and the forex realisation is much lower because of quality considerations. A study by the International Textile Mills Federation reveal that most Indian cotton varieties have trash content ranging from 5-12 per cent against 1-2.5 per dent in the imported cotton. Also, Indian cotton is amongst the most contaminated in the world.

The textile industry is, therefore, perforced to import cotton to emerge globally competitive and against this background, there is a need to lower the import duty on cotton instead of increasing it, sources said.

If the import duty is hiked, spinning mills will resort to yarn imports, which in turn will make fabrics and the ultimate products such as made-ups or garments uncompetitive for them, sources said and pointed out that 54 mills have closed down between March and August this year, leading to a loss of 27,510 jobs, 1.03 million idle spindles and 21,704 rotors.

To avoid such a situation, farmers need to cut costs and the government must introduce cultivation of genetically modified cotton without further delay and improve farming and ginning practices, said the industry.