The Southern India Mills Association (SIMA), the apex body of textile mills in the south, has urged Finance Minister Nirmala Sitharaman to allow duty-free cotton imports to ensure raw material security, and avoid stoppage of production and fall in cotton textile exports.
SIMA president Ravi Sam, in a statement, said the Centre should follow the same policy it had announced last year when it permitted duty-free imports during April-October.
He said 40 per cent of the cotton produced in the country is yet to arrive in markets, and farmers and traders were holding back stocks in anticipation of a hike in the natural fibre’s prices.
Textile exports drop 23%
“The industry has begun to face shortage of cotton and the uncertainty (over raw material) continues,” the SIMA president said.
The current situation has led to cotton textile exports declining by 23 per cent compared with last year, and the need to procure raw material at an “internationally” competitive price.
Quoting export data, Sam said yarn exports during April-January of the previous fiscal declined to 485 million kg compared with 1,185 million kg during the same period in 2021-22.
Pointing out that the Centre had imposed an 11 per cent customs duty on cotton imports in 2021, he said the objective was to protect the livelihood of cotton growers.
Fibre more expensive
Though the natural fibre’s prices increased, only traders and multinational companies seem to benefit. This has also affected the competitiveness of the Indian textile industry, Sam said.
The area under cotton increased to 130 lakh hectares this season to September from 124 lakh hectares last season but the production is estimated to be 320 lakh bales (170 kg).
Even out of this, only 80 per cent is of quality and the rest cannot be used for manufacturing high-value products. About 30 lakh bales are expected to be exported and if imports are not made duty-free the industry could face a raw material shortage, the SIMA president said.
Indian cotton is currently 15 per cent more expensive than global cotton and the textile industry has lost several export orders due to this. Two-thirds of the cotton produced in the country is exported as value-added textile products, providing employment to 11 million people.
Though India could import 3 lakh bales of cotton duty-free from Australia under the Indo-Australia free trade pact, traders Down Under are seeking a premium. This further affected the textile industry’s competitiveness.
Sam said ample availability of cotton and stable prices are essential for the industry to recover from the current sluggishness and achieve sustained growth.
The SIMA president said that since the Centre has come out with a separate HSN Code for imports of extra-long staple cotton during the 2023-24 budget, its shipments could be allowed duty-free into the country on a long term.