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

Feb 01, 2021
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.