There is an Economic Co-operation Trade Agreement (ECTA) or a Free Trade Agreement (FTA) with Australia. That allows duty free imports among others of three lakh bales of cotton annually. But with exporters demanding three to five centres per pound premium on supplies of this fibre the benefits of FTA have been lost, affecting global competition. All this is due to the 11 percent import duly imposed on cotton by India. The measure is aimed to protect our farmers. Far from it, it has adversely affected the textile industry, raising its costs, as already reported in these columns.
It is well – known that FTAs signed with Sri Lanka, Bangladesh and others in the past have led to largescale imports not envisaged by New Delhi. Fearing a flood of imports particularly garments from China, India decided against signing the Comprehensive Economic Partnership Agreement with the 10 nation Asean about 2 years ago. It was a wise move. Recently Asean indicated that it would review the Agreement. But New Delhi has stood from on the issue so far.
Over two – thirds of cotton produced in India is exported as value-added textile products, providing jobs to over 11 lakh people, besides earning dollar 25 billion in foreign exchange every year. The textile industry requires around 320-330 lakh bales of cotton against the crop size of 310-320 lakh bales. Out of this, only around 80 percent is of good quality and the rest cannot be used to produce high value – added textile products. Around 30 to 40 lakh bales of cotton is normally exported and therefore the industry would face acute shortage, if import duly exemption on cotton is not announced immediately, warns Southern India Textile Mills Association (SIMA) Chairman Ravi Sam.
He has said that it would take three to four months for shipments to arrive at mills premises and therefore it is essential to remove the duty, forthwith to enable the mills to enter into contracts.
Most cotton arrivals in India take place during the peak season (November-March). Most spinning units are in the MSME sector which can buy and stock cotton for upto three months due to working capital constraint and to bridge the demand supply mismatch during the off-season (April – October). They opt for imports which have become unavailable because of the duty.
The area under cotton has increased from 124 lakh hectares to 130 lakh hectares. Despite that, the cotton crop for the current season is likely to be around 320 lakh bales. The cotton price has dropped over 25 percent compared to last year and over 40 percent of cotton is yet to arrive in the market. Farmers and traders are holding it anticipating a rise in the price. The industry, therefore, has started facing the shortage and the uncertainly is still continuing.
As stated earlier, the 11 percent import duty on cotton has also been levied on cotton waste, the key input for open-end spinning mills in Tamil Nadu. There are 600 such mills in the state and they are into production of house hold items such as towels, bed sheets and floor mats. The mills spin yarn of 20 to 30 counts only. The mills have been facing a tough time for more than a year now. Several of them are unable to pay back either the obtained loans or processed with the production due to mounting financial stress.
Though the issue has been flagged off by spinners and conveyed to Union Commerce Minister Piyush Goyal and TN State Electricity Minister, no progress has been made so far and the situation has only worsened, says President of the open end Spinning Mills Association G. Arul Mozhi. High Electricity tariff is also playing havoc with the industry.
The open-end spinning mills want the Union Government to prohibit waste cotton export to reduce its price and meet their raw material needs. While cotton export is allowed despite domestic demand, a 11 percent tax has been slapped on cotton waste. Exporters contend that cotton waste export should be stopped, so that domestic availability gets increased and ensured smooth functioning of open end spinning mills.
The Indian textile and apparel market is projected to touch dollar 344.1 billion by 2027, showing a compounded aggregate growth rate of 14.8 percent during 2022-27. The sector contributed 2.3 percent to the country’s GDP, 13 percent to industrial production and 12 percent to exports. Around 45 million people are employed in the industry, making it as the huge employment generation source for India.
Government authorities say India’s growth as a manufacturing hub for textile and apparel will depend on the attractiveness of the domestic market and investments in high-end textile machinery, products in emerging areas like technical textiles and manmade fibres.
The T and A Sector is extremely varied with handspun and hand-woven textile sectors on the one end of the spectrum with the capital intensive sophisticated mill sector at the other end. In terms of global ranking India stands second in textiles export with a 7 percent share and sixth in apparel export with a 3 percent share. Overall India holds fourth position with a 5 percent share of global exports.
India is expected to achieve a higher rank in global. T and A business as India is self sufficient in the entire value chain for textile manufacturing and cost of manufacturing is at a competitive rate.
India has become an attractive destination for foreign Direct Investment (FDI) in the textile industry because of 100 percent FDI under the automatic route and under single brand retail and upto 51 percent FDI in multi brand retail. The increase in the FDI rate has led to several benefits like capital formation, advanced technology and employments generation.
The textile sector has a huge potential area for FDI due to a surge in demand for technical textiles. It also several high employment opportunities. The future looks promising, buoyed by strong domestic consumption as well as export demand various initiatives have been worked out to give a boost to the technical textile industry.
The players in the industry are achieving sustainability in their products by manufacturing textiles that use natural recyclable materials. The growth of the industry will be driven by growing household income, increasing population and demand by other sectors like housing hospitality, health care etc.,
Besides, State Governments are also joining hands with the Central Government and unveiling of sector specific policies for the textile industry. The states which have introduced textile policies are Tamilnadu, Jammu and Kashmir, Jharkhand, Bihar, Karnataka, Gujarat, Odisha and Uttar Pradesh. These states offer attractive incentives for companies willing to invest.
