Not only the premium which cotton yarn export quotas used to command in the past, but the price realisations have also been wiped out, according to trade sources. The prices have fallen so low that the chances of earning any profit from cotton yarn exports and claiming tax exemption on the same, have nearly vanished. Cotton yarn exporters are said to be struggling for their very survival.

The European markets for cotton yarn exports are in a bad shape. Those who have obtained quotas for export to these markets are finding it very difficult to make full use of them. The question of purchasing such quotas from others by paying a premium, therefore does not arise at present. These quotas were commanding premium of about Rs 3 to 4 per kg, just about a month ago and asmuch as Rs 20-30 per kg last year. This has been a thing of the past, and the situation is now said to be so bad that exporters may have to effect shipments even below cost, just to utilise the quotas in hand.

Explaining this, exporters point out that cotton yarn 2/30s carded (weaving) TFO has been transacted as low as $2.50 per kg compared with $2.75 to $3.00 per kg available just 3-4 months ago. Similarly, 2/32s carded is now realising in non-quota countries only around $2.50-2.60 per kg. It was selling around $3.00 per kg about six months ago.

Exporters argue that when there is virtually no profit from cotton yarn exports, section 80HHC which provides for exemption of tax on export profit has become superfluous in this case. Besides, certain international agencies have raised objections to such tax exemptions, calling it a subsidy. The situation should be urgently reviewed and alternative measures should be taken to make exports competitive in overseas markets.

Exporters said that they would not mindeven if 80HHC is abolished and even export profits are taxed, provided a situation is brought about to make these profitable. In the past, Indian textile exports used to be competitive in the world markets, due to domestic cotton prices being lower than the rates prevailing abroad. That situation has already changed. The chances of textile mills getting indigenous cotton at lower than international prices are therefore remote. However, by arranging for the refund of certain local taxes the government can still make Indian exports really competitive again. For instance, levies like sales-tax, purchase-tax, octroi, electricity charges and others, which the domestic industry has to bear, but are non-existent in other countries. If an arrangement is made for the complete refund of cumulative burden of such taxes and even if 80 HHC is withdrawn, the exports from the country may become competitive once again.

If this system is to be effective, banks receiving export proceeds should be authorised and directed topay such refunds to the exporters concerned, as soon as the foreign exchange is received. The current system for claiming excise and customs refund is not only dilatory, but also breeds corruption. At present, textile mills are complaining about rising imports of textiles, but so long as the principles of liberalisation and globalisation hold valid, little can be done to avoid this. Removal of local taxes, so far as exports are concerned, might enable them to be more competitive in the export markets.

In the domestic market, the supply of cotton yarn from mills in the south is somewhat reduced. The prices of some finer counts have, therefore, firmed up while those for others are steady-to-firm.