Indian cotton textiles industry upbeat on import of US cotton at lower tariff
The cotton textile industry sees a need for imports of the natural fibre at a lower cost particularly when the industry is gung-ho over the trade deal with the European Union, apart from the US.
The cotton textiles industry is upbeat over the Indo-US trade deal, particularly with cotton imports likely to meet the expected demand surge for the natural fibre over the next few years.
Though details of how cotton imports would be permitted are not clear, industry leaders expect the government to either follow the Australian cotton import formula or lower duty on US cotton by 50 per cent.
However, the cotton textile industry sees a need for imports of the natural fibre at a lower cost particularly when the industry is gung-ho over the trade deal with the European Union, apart from the US.
Output stagnation
“Indian cotton production has stagnated over the past couple of years. We need quality cotton besides extra-long staple to cater to the export market. Domestic cotton prices are also higher than global cotton,” said K Venkatachalam, advisor, Tamilnadu Spinning Mills Association (TASMA).
“The free trade agreement with the EU last month and the deal with the US now will likely lead to demand for cotton doubling, he said.
“It is possible that India may cap the import volume for duty concession at 5-10 lakh bales (170 kg). We have to await the notification. But US cotton is the best in quality. It is contamination-free, and prices are low, too,” said Atul Ganatra, former President of Cotton Association of India (CAI).
Cotton imports may be allowed duty-free from the US. “We, however, have to see the fine print,” Ram Kaundinya of Federation of Seed Industry of India (FSII), said.
He said cotton production in India is inadequate due to a continuous decline in yields and production in last 5-6 years. Not introducing new technologies, Pink Bollworm attacks, etc have contributed to this situation.
Options before govt
“Nothing is clear now. Maybe, the government can halve the duty for US cotton from the 11 per cent it imposes generally for cotton, barring extra-long staple cotton that is duty-free. It could also permit duty-free import of US cotton up to 50,000 tonnes (about 2.95 lakh bales) as it has done for Australian cotton,” said Anand Popat, a Rajkot-based trader in cotton, yarn and cotton waste.
“It looks to be a good deal with cotton textiles. It will provide an opportunity for the textile sector to flourish. Currently, imported cotton is cheaper than domestic cotton. The Cotton Corporation of India (CCI) holds at least 95 lakh bales and is offering around ₹56,500 a candy (356 kg). Imported cotton landing costs are below ₹54,000,” said Ramnuj Das Boob, a sourcing agent in Raichur and vice president of All India Cotton Brokers Association.
Ganatra said the landed cost of Brazilian cotton was ₹50,000 a candy. With cotton prices on InterContinental Exchange, New York, near a 52-week low, prices could bottom out around 61 US cents a pound. “Imported cotton is about 10 per cent cheap and the textiles industry would be able to take advantage of it,” he said.
This would help in at least 4 per cent better realisation in yarn prices. Again, when the industry would be needing cotton between June and September, imports from the US and Australia would help, said Ganatra.
Kaundinya said India has to import cotton anyway. “So that should not create any additional problem if we import cotton from US without any duty,” he said.
Imports set to double
Popat said duty-free imports could lead to better consumption of yarn in the domestic market. Currently, only 65 per cent of the yarn produced is being utilised. “This could increase with more cotton coming into the country as fabric and garment manufacturers will procure more domestically,” he said.
Ganata expects cotton imports to double during the current cotton season to September.
The industry is optimist of sustainable mills growth and the lowering of import duty would go a long way in getting the raw material at a lower cost.
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