Covering cotton yarn under MEIS will boost India’s exports: Textile industry body

By: | Published: February 12, 2019 1:38 AM

To benefit the farmers with better price for raw cotton, the Centre shall also bring the cotton yarn under MEIS coverage, said the Confederation of Indian Textile Industry.

Covering cotton yarn under MEIS will boost India’s exports: Textile industry body

The union government must include cotton yarn under Merchandise Exports from India Scheme (MEIS) to help boost India’s exports and penetrate new markets, especially in Africa. To benefit the farmers with better price for raw cotton, the Centre shall also bring the cotton yarn under MEIS coverage, said the Confederation of Indian Textile Industry.

In a statement, CITI chairman Sanjay Kumar Jain said that despite abundant availability of raw materials and the  second-largest cotton spinning infrastructure in the world, the cotton yarn exports are struggling in the absence of government support. He pointed out that India’s cotton yarn and fabric exports are struggling because of the duty disadvantage faced by the Indian exporters in major markets. There has been continuous decline in exports of cotton yarn and fabric during the 2013-14 to 2017-18 period.

India’s exports of cotton yarn declined by 25% from $4,570 million in 2013-14 to $3,443 million in 2017-18. In the same period, fabric exports declined by 7% from $4,941 million to $4,598 million, he added. The confederation is requesting the government to enhance MEIS for fabric from 2% to 4%, at par with made-ups. The weaving sector is labour intensive like the made-ups and garmenting sectors. Weaving is mostly carried out in the unorganised sector especially in the rural and semi-urban areas. The sector employs women labour substantially. Hence, if the MEIS rate for fabrics is increased from 2% to 4%, it is estimated that exports of fabrics will increase by $1 billion per annum, Jain emphasised.

Jain pointed out that Indian spinning mills performed well in exports during 2013-14 when the cotton yarn was covered under schemes such as 2% incremental export incentive, 2% interest subvention and 3% focus market incentive and the sector could penetrate into alternate markets other than China. However, suddenly all incentives were withdrawn leading the spinning mills high and dry.

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China which is the largest importer of cotton yarn has shifted from India to Vietnam/Indonesia as they have duty free access while Indian yarn carries 3.5% import duty. From 2013 to 2017, there has been a decline in India’s cotton yarn exports to China by 48% while exports from Vietnam and Indonesia has increased at a remarkable rate of 129% and 55% respectively in the same period, Jain said further.

According to him, India’s raw cotton is going to various markets at zero duty. India exported $1,894 million worth raw cotton in 2017-18. Exporting of raw cotton bales instead of value addition by converting to yarn and fabric is leading to loss of valuable foreign exchange, employment and better remuneration to farmers. Similarly fabric exports from India are at serious disadvantage vis-a-vis exports from competing countries due to duty differentials in leading exports markets. Markets like the EU, China, Turkey and Vietnam impose an import duty in the range of 8-12% on Indian fabric while duty free access is given to countries such as Pakistan, Cambodia, Bangladesh and Cambodia.

Falling of Indian cotton yarn and fabric exports is impacting the whole value chain from farmers, spinners to weavers/knitters as there is considerable exportable surplus in country but we are not able to be overcome the tariff disadvantage despite being competitive in both spinning and weaving. As per the Financial Stability Report by RBI, the stressed advanced ratio of textiles sector stood at 18.7 in September 2018. Further, he highlighted that growth in clothing has not been supportive to consume the extra capacity leading to pressure on the yarn and fabric capacities. The exports of garments has declined from $17.4 billion in 2016-17 to $16.7 billion in 2017-18.

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