Bangladesh textile industry lobbies for safeguard tariff on Indian cotton yarn imports.
Nagpur: Amidst unrest in run-up to elections, the textile industry in Bangladesh is lobbying for imposing a 20% safeguard tariff on import of cotton yarn, blended yarn, and even grey melange from India. These are key products made by industries in India, including the units in Vidarbha. A safeguard tariff is a temporary duty imposed by any country to protect the local industry.
A note was circulated by a foreign trade research officer in Bangladesh to the country's trade and tariff commission, commerce secretary, and the textile mills association suggesting slapping safeguard duty on Indian cotton at a meeting that was convened on January 5. Even as the outcome of the meeting is not known yet, the note has gone viral in India. This has left the textile sector here worried, as industry players say it could be a double whammy. India losing its competitive edge in Bangladesh may affect rates of raw cotton fetched by farmers, they suggested.
The tariff threat comes at a time when India re-imposed the duty on raw cotton imports from January 1. The 11% duty was lifted in August, following tariff tension with the US.
However, despite stiff lobbying by the textile sector, it was not extended beyond December 31. Lifting of duties allowed cheaper imports of raw cotton to India, benefiting the sector. However, within 1 week of bringing back the duties, cotton prices even in the private market have touched the minimum support price (MSP) of Rs 8,110 a quintal for the best grade.
Costlier cotton would affect margins for the Indian textile industry. If Bangladesh imposes a duty, even exports from India would be affected, say industry sources.
Prashant Mohta, managing director of Gima Tex Limited and president of Vidarbha Industries Association (VIA), said 30% of the yarn produced each month in Vidarbha is exported to Bangladesh. This came to as much as 3,000 tons. There are around 45 units engaged in yarn production in Vidarbha alone. The duty will lead to yarn prices crashing in India, even impacting cotton prices. Moreover, India has duty free imports of Bangladeshi apparel.
The demand to impose a duty in Bangladesh stemmed from a wrongful practice by industries of the country, unearthed by the country's authorities recently. Certain licensed importers in Bangladesh are allowed to bring in duty-free yarn from India only if it is used to make garments that are ultimately exported. However, it was found that certain industries consumed duty-free cotton and sold garments in the domestic market, affecting the trade dynamics in Bangladesh. This led to a demand for imposing a duty on imports from India, said a source.
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