The government today announced a five per cent duty incentive on export of raw cotton by including the fiber commodity in the Vishesh Krishi and Gram Udyog Yojana.
“The products (raw cotton) .... shall be entitled for duty credit scrip on exports made with effect from April 1, 2008,” the directorate general of foreign trade said in a notice. The benefit is available on exports made till June 30.
The Vishesh Krishi and Gram Udyog Yojana has been launched for the promotion of exports mainly of farm produces, including value-added products.
However, the move has come under sharp criticism from both the textile industry and the apex body of exporters, FIEO, which said the domestic industry would lose its competitive edge to global players.
“This will be tantamount to subsidising the textile industry of Pakistan, Bangladesh, Indonesia and China, which are our major competitors in the global market as our cotton will now be available to them at lower price,” Confederation of Indian Textile Industry (CITI) said.
“Funds that are being given for export incentive could have been used more appropriately to reduce the price of procured cotton for Indian consumers,” CITI secretary general D K Nair said. Federation of Indian Export Organisations (FIEO) said the move would increase the prices of raw cotton in the domestic market.
“It will also enhance the competition because our competing countries would be getting raw cotton at lower prices after factoring the benefit,” FIEO president A Sakthivel said.
Terming the move as a political decision, trade expert Arun Goyal said it has been done to benefit cotton farmers of Maharashtra. “The move will hit the garment industry and fabric exporters severely,” he said. Cotton production in the country is likely to decline to 29 million bales this year, compared with 32.2 million bales estimated in October 2008.
According to an industry estimate, India had exported about 8.5 million bales of cotton last year. The country’s domestic consumption touched 24.1 million tonnes last year.
