The Indian textile industry has not only welcomed the move to remove import duty on extra-long staple (ELS) cotton but also hopes that the government will soon realize the need to eliminate duty on other cotton varieties. After this decision, cotton prices in Gujarat market fell by Rs 600 per candy of 356 kg due to immediate pressure on market sentiment. However, prices improved to some extent on Wednesday.
The Central Government has removed import duty on ELS cotton. The country is heavily dependent on imports of ELS cotton. At present, around 11 per cent import duty is applicable on raw material used for fine counting of cotton yarn. “This is a worthy step,” said managing director of TT Industries and former president of the Confederation of Indian Textile Industry (CITI). We hope that the import duty on other varieties of cotton will be reviewed sooner or later.
The government has to maintain a balance between the competitiveness of the industry and the protection of the farmer through MSP. He said India is a net importer of ELS cotton as the country does not grow enough cotton to meet the requirements. Import duty had made Indian value-added products made from yarn of 60/1 and above expensive. The farmers did not get any benefit. The government has rectified a mistake.
“The removal of import duty may provide some relief to the textile value chain of high-end fabrics,” said Bharat Shah, a powerloom owner from Ichalkaranji in Maharashtra. For good quality clothes and garments, the production cost may be slightly reduced. He said that the psychological impact on the market sentiment of cotton may be seen only for a few days. The overall market dynamics will not change due to the government's decision.
A leading cotton yarn trader from Delhi said that the consumption of ELS cotton is very less out of the total cotton requirement. Therefore this decision will have very limited impact. It cannot replace Shankar-6 cotton of Gujarat as ELS cotton is very expensive. Trade sources said cotton prices fell by Rs 600 per candy in the Gujarat market on Tuesday after the news broke. Sentiment weakened due to the wait and see policy of cotton buyers. However, prices increased by ₹200 per candy on Wednesday.
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