Imports of International cotton brands from the USA and Egypt help improve domestic availability pull the spinning sector out of its current crisis situation and do not affect the farming community, spinners maintain. Why, therefore, permission to import these varieties without the 11.5 percent duty is not forthcoming from the Union Government, question spinners.
What they are referring to is the import of PIMA cotton variety from which the USA and GIZA variety from Egypt of cotton extra long cotton (ELS) is short supply to the extent of 75 percent.
The total amount of imports of these varieties is roughly six lakh bales (170 kg each) and constitutes just 1.5 percent of this country’s total cotton output. Southern India mill owners contend the crisis faced by the sector has to a 50-70 percent drop in capacity utilisation almost a year now, besides causing financial stress and is unable to service the debt and meet standing charges, making them non-productive assets (NPAS).
According to Southern India Mills Association (SIMA) imports of duty-free cotton from the USA and Egypt is imperative to maintain the existing market share in high value added products and to sustain the viability of spinning mills. These millls have made 30-50 percent higher investment in the most modern technology machines and equipments to produce such special products.
In a representation to the Union Finance Minister Nirmala Sitharaman SIMA says the spinning sector is struggling to sustain their business due to an “un-competitive” raw material prices due to various reasons, the primary one being the import duty on cotton. The disadvantageous position of Indian manufacturers has been well utilised by Bangladesh and Sri Lanka from where garment imports are looming large.
India imports around 2.70 lakh bales of PIMA variety out of a total production of one lakh tonnes in the USA. Giza Cotton production in Egypt is one lakh tonnes and India imports 2.40 lakh bales (170 kg each). The estimated total business created out of these varieties is about Rs.47000 cr with an estimated employment potential for 4 Lakh people.
With ELs cotton imported from the US and Egypt the textile value chain generates around Rs.60000 cr textile business size and provides direct jobs to 12 lakh people. The value addition in the ELS cotton varieties is roughly ten times.
It is not as if SIMA is not aware of the timely assistance extended by the government in the past. Between April 2022 and October 2022, the import duty was exempted and enabling a level playing field. A separate HSN code for ELS cotton varieties imported from different countries was introduced realising the need for exempting such cotton from the duty.
SIMA says it may not be possible for the government to exempting the entire ELS cotton varieties from the duty in the current scenario. It has stressed that PIMA and Giza cotton varieties are most important ELS cotton varieties consumed globally to manufacture high value added textile products because of their high softness length uniform, excellent micronaire value etc., PIMA and Giza cotton varieties are commonly used to produce luxury oriented clothing items such as bathrobes, lounge wear, night gowns, superfine shirting, suiting etc., These types of cotton are also incredibly popular and extensively used in the manufacture of bed sheets, fabrics etc.. The Indian cotton varieties such as DCH32 are also mixed with these imported cotton varieties to enhance the value addition.
SIMA further says it appreciates the government’s move to extend covid relief measures, including Emergency Credit Line Guarantee Scheme (ECLGS) to the extent of Rs.20 lakh cr not only to mitigate the ill effects of covid but also to make India as one of the fastest growing economies in the world. Under ECLGS, an amount of Rs.2.82 lakh Core was disbursed till September 20, 2022, of which textiles account for about 6 percent share amounting to Rs.16,920 cr.
