SIMA urges Indian govt to remove import duty on cotton

The Southern India Mills’ Association
(SIMA) has fervently appealed to the
Union Finance Minister to withdraw
the cotton import duty, as the duty is
severely hurting the global
competitiveness of the Indian textile
and clothing industry. According to
SIMA, the announcement with regardto the levy of 5% BCD and 5% AIDC with applicable cess on
the import of cotton in the Union Budget 2021-22 does
benefit the Indian farmers while having a severe
detrimental impact on the high value-added segments
and eroding the competitiveness of our garments and
home textile exporters. The levy of these import duties is
a major blow to the Indian cotton textiles industry which
was just recovering from the losses suffered during the
pandemic and lockdowns last year.

Similar import duty policy intervention of 10%
customs duty, 4% additional customs duty and 3%
education cess exercised during 2007-08 had a severe
impact on Indian spinning industry and after
understanding the ill effects the Government withdrew
the import duty.

In a press statement, Ashwin Chandran, Chairman,
The Southern India Mills’ Association (SIMA), has
appealed to the Union Finance Minister to withdraw both
the basic customs duty and the agriculture infrastructure
development cess levied on cotton to create a level
playing field on the raw material front for the Indian
Textile and Clothing Industry. While appreciating the bold
initiatives of the Finance Ministry in addressing the
structural issues in man-made fibres (MMF), Ashwin
Chandran stated that the import duty on raw cotton would erode the competitiveness the value-added
segments that has a business size of around Rs 50,000
crores in exports and Rs 25,000 crores in the domestic
market. These segments provide jobs to around 12 lakh
people. He added, “It has taken over a decade for the
Indian textile industry to build up the market share in
these segments and with the levy of cotton import duty,
we will lose our competitiveness and market share to the
competing countries such as Bangladesh, Sri Lanka,
Pakistan and Vietnam.”

SIMA Chairman stated that the Government might
receive around Rs 360 crores per annum as additional
revenue on account of the import duty on cotton but will
in turn imperil annual GST revenues of around Rs 1800
crores. More importantly, the import duty will not benefit
the Indian cotton farmers owing to the negligible volume
of imports and the non-availability of such speciality
cottons in India at the moment.

Bed linen and terry towel exports to USA to the tune
of $ 1200 million and another $ 500 million to EU
countries per annum are predominantly produced out of
ELS and contamination free cottons. Ashwin Chandran
pointed out that since the Indian textiles and clothing
exporters are predominantly MSMEs, it is practically
impossible for them to avail duty exemption under the
Advance Authorization Scheme.

He stated, “None of the countries in the global textile
trade including our major competitors such as China,
Bangladesh, Pakistan, Vietnam and Sri Lanka, levy an
import duty on cotton. We are given to understand that
the Ministry of Textiles and the Ministry of Commerce
and Industry have already recommended the removal of
import duty on cotton and the Ministry of Agriculture
has also given its nod.” Therefore, SIMA has fervently
appealed to the Union Minister for Finance to take steps
to withdraw the import duty.