The benefit of five per cent incentive on exports of cotton given effect retrospectively from April 1, 2008, would not reach the intended beneficiaries, a top industry official has said.
With the cotton season already over and most farmers having sold their produce, the aim of the government to provide relief to cotton producers would not be achieved, Textiles Export Promotion Council (Texprocil) Chairman V S Velyutham said in a statement here.
Reacting to the Centre's decision to provide five per cent incentive for cotton exports and allow government agencies such as Cotton Corporation of India (CCI) to provide discounts for bulk purchase, he cautioned that these measures could become counter-productive if some other steps are not taken immediately.
"These measures, though well-meaning, could become counter-productive and detrimental to overall growth of Indian textile industry, if simultaneous steps to protect the interests of value-added segments such as yarn, fabrics and home textiles were not taken immediately," he said.
The export competitiveness of the Indian textile industry is already reeling under the pressures of high cost of cotton on account of an unrealistic rise of over 40 per cent in its MSP (minimum support price), Velyutham said.
The industry was eagerly looking for some relief in cotton prices. Contrary to expectations, the recent moves have further aggravated the on-going crisis, Velyutham said.
"We understand that cotton exports need to be encouraged, but not at the cost of hampering the growth of value-added textiles and the clothing (T&C) sector."
Due to high prices of cotton and a slowdown in major markets, Indian textile industry was holding on to the purchase of cotton. The exports of cotton would worsen the stock-to use-ratio, which is already low at around 26 per cent as compared to the global average of 54.79 per cent during 2008-09, he said.
Lower availability of cotton in the domestic market would severely hamper the growth prospects of value-added T&C sector, which not only is a significant foreign exchange earner but also is the largest employment-providing sector after agriculture.
The decision of allowing government bodies to provide discounts on the bulk purchase of cotton will benefit only the speculators and commodity hedge funds and not the manufacturers, who are not in a position to lift bulk quantities, Velyutham said.
The export competitiveness of the Indian textile industry is already reeling under the pressures of high cost of cotton on account of an unrealistic rise of over 40 per cent in its MSP (minimum support price), Velyutham said.
