The Indian textile industry, whose margins have been squeezed by the 27 per cent increase in cotton price last season, has gone on the warpath to ensure that a situation similar to last season is not replicated in 2010-11.
Industry players are demanding that preferential status be accorded to readymade garment exports over export of raw cotton; that export of cotton, if any, should be carried out in a calibrated manner, and that domestic demand for cotton should be given priority over exports in the upcoming season.
The industry also wants cotton exports to be relegated to the latter part of the season, along with the imposition of a licence on cotton exports.
“The best way out of the present rut that the industry finds itself in, will be the re-imposition of the Rs2,500 export licence registration fee that had been imposed earlier this year. Exports in the coming season should not be allowed before February,” said Ashish Bagrodia, president of the North India Textile Mills Association (NITMA).
The cotton season, incidentally begins in August and ends in April.
There is also a demand for extension of the Technology Upgradation Fund Scheme (TUFS), which, according to Bagrodia, has encountered a stumbling block and has not yet been scrapped. The industry is also lobbying for export incentives such as taxation refunds and duty relief.
“Readymade garments incentivised under Market Linked Focus Product Scheme (MLFPS) for export to the US have not been included in the annual supplement. The US is not completely out of the woods yet and the two per cent incentive is very much required for exports to be competitive,” said Tirupur Exporters’ Association (TEA) President Arumugam Sakthivel in a circular to be presented to Commerce Minister Anand Sharma.
Despite the fact that India is the second largest cotton grower in the world and produces cotton in excess of domestic demand, last season saw increasing costs because of disproportionate cotton exports, not leaving enough for the domestic textile sector.
In 2009-10, it was estimated that India produced 29 million bales. Domestic demand was pegged at 24.5 million while the rest was ideally slated for exports, according to industry estimates.
The government, on the other hand, pegged initial exports at 5.5 million bales. The figure was revised to eight million by April, when the international market, driven by China and Bangladesh, saw a demand upsurge.
“The industry is in trouble because of the continuing favour that the government shows towards cotton exports,” lamented Sunil Agarwal, proprietor of a Kolkata-based export company and member of TEA, adding that “the situation could be rectified if the government supports products on which value additions have been made — export of fabric and readymade garments instead of raw cotton.”
