10% import duty on cotton – a severe blow: SIMA

The predominantly cotton
based Indian textiles and clothing industry employing over 110 million people
has been facing several challenges during the last four years that got
aggravated owing to the unprecedented distress caused by COVID-19
pandemic.  Realising the need for
sustaining the global competitiveness of the highly labour intensive textile
industry, the Government has been taking series of policy interventions to
enhance the global competitiveness including withdrawal of anti-dumping duty on
PTA, Acrylic Fibre, rejecting the proposed ADD on PSF, MEG, etc., including the
recent reduction of BCD on nylon.

 

India has been globally
competitive only in the cotton textile manufacturing, thereby accounting for 80
per cent of its total exports.  Cotton
and cotton waste which is currently under nil rate of import duty is being
subjected to 10 per cent import duty through the budgetary announcement
comprising of 5 per cent Basic Customs Duty and another 5 per cent Agriculture
Infrastructure and Development Cess (AIDC) on cotton and 10 per cent BCD on
cotton waste has come as a severe blow for the ailing cotton textiles and
apparel industry.  The new import duty
comes into effect from 2nd February 2021.

 

In a Press Release issued
here today, Ashwin Chandran, Chairman, The Southern India Mills’ Association
(SIMA) has appealed to the Prime Minister to immediately withdraw the levy of
10 per cent import duty on cotton and cotton waste to sustain the global
competitiveness of Indian textiles and apparel industry and prevent job losses
for several lakhs of people, prevent fall in the exports and also curb cheaper
imports of value added products from the SAFTA countries like Bangladesh, Sri
Lanka, etc. 

 

Chandran has stated that
the levy of 10 per cent duty will not benefit the cotton farmers as the normal
import of 12 to 14 lakh bales per year accounts only around 3 per cent of
Indian cotton production and consumption and such cotton is not produced in
India.  But this is essential to sustain
the share of value added / niche markets of India both in global and domestic
markets. He has added that after the introduction of BT cotton that accounts
over 97 per cent of the cotton produced in the country, the cotton textile
industry has to import ELS cotton, organic cotton, contamination free cotton to
the tune of 10 to 12 lakhs bales per year to meet the demands of the global
customers and also the value added made-ups and apparel segments of domestic
market.  He has cautioned that the
country is already flooded with cheaper imports of readymade garments from
SAFTA countries and facing crisis.

 

SIMA Chairman while
appreciating the government policy of making any raw material available at
competitive rate by removing the anti-dumping and other import duties, the
sudden announcement of levying import duty on cotton has come as a rude shock
for the industry that is just coming out of the ill effects of COVID-19.  He has added that yet another government
policy of addressing inverted duty structure in the GST is also defeated with
this levy as the cotton value chain attracts 5 per cent GST and will add the
cost to the customers and discourage value addition.

 

Ashwin has stated that the
MMF textile value chain’s growth was curtailed due to import parity pricing
policy being adopted by the indigenous fibre manufacturers during the two
decades and the recent removal of ADD on PTA has create a level playing field
for the polyester segment.  He has feared
that the multinational cotton traders and the major traders would adopt the
same model and the competitiveness of predominantly MSME based cotton textiles
& apparel industry will be affected.

 

Ashwin has stated that the
MSME and decentralised nature of the yarn, fabric and garment manufacturers in
the country will not be in a position to take advantage of Advance
Authorization Scheme and such scheme would benefit only the vertically
integrated units that account less than 10 per cent of the exports.

 

SIMA Chairman has stated
that the Government had withdrawn the import duty on cotton during July 2008
consequent to the severe recession faced by the industry and also a Nation-wide
bandh by the entire cotton textile value chain. 
He has stated that when the import duty was there, the multinationals
used to cover major volume of cotton and export and thereafter the industry had
to import cotton at higher price and thereby the foreign exchange also got
affected.   Therefore, SIMA chief has
urged the Prime Minister to withdraw the 5 per cent BCD and 5 per cent AIDC and
also 10 per cent BCD on cotton waste to sustain the global competiveness of the
cotton textile value chain and make Aatmanirbar Bharat vision, a reality.

 

SIMA Chairman has thanked
the government for announcing the Production Linked Incentive Scheme by
allocating Rs 1.97 lakh crore including Rs 10,683 crore for textile industry,
giving thrust to develop the global competitiveness in the MMF textile value
chain.  He has stated that the focus
product incentive scheme under PLI Scheme for MMF and technical textiles would
give enormous opportunity for the growth of Indian MMF and technical textile
products.

 

Ashwin has hailed the
announcement of MITRA scheme aiming at developing seven mega textile park with
plug and play facility and facilitate 40 to 50 leading textile players to
become global champions.  He has stated
that Tamilnadu being the largest textile manufacturing State, is planning to
develop three mega parks under MITRA, Andhra Pradesh and Telangana State are
already having one such park each.  He
has stated that this would facilitate attracting large scale investments
including FDI and JVs.

 

While welcoming the
allocation of Rs 700 crore for TUF Scheme and Rs 80 crore for SITP, SIMA
Chairman has hoped that additional allocations would be made liberally based on
the claims filed by the Ministry of Textiles. 
Ashwin has stated that there is a backlog of over Rs 10,000 crore under
TUFS for several years and hoped that the government would release the same
during the financial year 2021-22 to enable the industry to make investments and
create jobs under different schemes.