Textile sector pitches for removing import duty on all varieties of cotton

Textile industry stakeholders, in a meeting with Union Finance Minister Nirmala Sitharaman on Thursday, pressed for removing import duty on all varieties of cotton or at least on extra-long staple (ELS) cotton to curb the rise in prices, and highlighted the issue of alleged hoarding by cotton players.

The price of one cotton candy (one candy = 356 kg) increased from around Rs 37,000 in 2020 to Rs 80,000 now. Normally, any increase in the price by Rs 1,000 per candy would lead to an increase of Rs 4 per kg of yarn.

Domestic raw cotton prices have moved up by almost 69 per cent between last January and this year while international prices have jumped by nearly 65 per cent during the same period. Other than the rise in cotton and yarn prices and futures trading, alleged cotton hoarding is what the industry is concerned about.

Industry groups and the government of Tamil Nadu had highlighted there was a shortage of around 80 million bales (one bale = 170 kg) in the market, which may be with either traders or farmers. The industry bodies sought Sitharaman’s intervention in regulating the participation of multinationals in commodity exchanges, bringing out the cotton not found a place in the market, and allowing Cotton Corporation of India (CCI) to purchase cotton just above the minimum support price.

According to a source present in the meeting, the finance minister was not fully aware that CCI had not purchased any cotton this year so far. “For the removal of import duty, even on ELS cotton, the minister was found concerned as how it would impact the farmers. The minister, after hearing the views of the industry, advised sending a representation immediately for her consideration,” said a source.

Confederation of Indian Textile Industries (CITI) Chairman T Rajkumar, Tamilnadu Spinning Mills Association Chief Advisor K Venkatachalam, and Feder­ation of Indian Export Organ­isations Chairman A Sakthivel were among those who represented the industry. There were representatives from the Tamil Nadu government also.

According to industry players, due to the imposition of import duty on cotton to the extent of 11 per cent, except by advance authorisation under the duty exemption scheme, cotton import is not possible. Therefore, much of the domestic operation is dependent on only local cotton. This makes the demand increase. Cotton is also being allowed to be listed for trading under MCX/National Commodity Clearing and due to this, a great level of speculation is happening and this also is one of the reasons for an unrealistic price rise for raw cotton, as most traders are trading on speculation.

Trade sources said another reason for the price rise was a mismatch between the production estimates of the government and crop output. The Centre estimates cotton production in 2021-22 at 36.25 million bales, while traders said it was around 33-34 million bales.

The Cotton Association of India (CAI) expects production to be around 34.8 million bales. Consumption this year is expected to be around 35 million bales, though some traders said it could be around 33.5 million bales.

If the consumption is estimated to be around 35 million bales and production at the lower end of the band, say, 33.5 million bales, the total cotton closing stock at the end of the current season is expected to be around 1.5 million bales, after accounting for 4 million bales of exports.