Changes In Free Trade Agreement, Raw Material Cost Key Bottleneck For Indian Exporters

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In conversation with Dr. Selveraju, Secretary General of SIMA ( The Southern India Mills Association )

Facing tough competition in the global arena, textile industry the Indian government should immediately address the bottlenecks in the fair trade practice, cost of raw materials to reduce the tension on the Indian exporters according to the Southern India Mills’ association (SIMA).

The association has recently concluded their exhibition for textile product in Jan. The event happened in Tamil Nadu, was a first-of-its-kind initiative organized jointly by the state and central governments. Government of Tamil Nadu, jointly with The Cotton Textiles Export Promotion Council (TEXPROCIL) and Powerloom Development & Export Promotion Council (PDEXCIL), other Export Promotion Councils and Textile Industry Associations has made active partnership in successfully concluding the event. Tamil Nadu being the largest textile manufacturing state in the country having presence across the textile value chain and Coimbatore being the textile hub in the globe, the Expo was considered as  a golden opportunity for all the Textile Products Manufacturers, Traders / Buyers, Exporters and Consumers to zero in their requirements and grab the emerging Textile Business Opportunities.  300 exhibitors across the country covering all the products made participation in the event which had 30 Thousand visitors out of whom 200 are overseas buyers from 35 countries.

Key challenges to address:

According to the association, while there are plenty of challenges to be addressed, the key are the bottle-necks that hinder their growth in selling in the European Union is the free-trade-agreement and the cost of raw material increasing drastically while the margins are in single digit.

“Our yarn product attract 10% to 36% duty to Bangladesh while they can export anything at free duty in India. China, Bangaladesh, Vietnam, Sri Lanka , Pakistan has no duty. In fact, Pakistan has entered GSP+ agreement with European Union much earlier which has zero duty in Europe. These things are some disadvantages for our side.”, Dr K Selvaraju, Secretary General of the association says further adding that the profit margins in textile business are as less as 3% to 6%. According to him ,in many cases, Indian players lose orders only because of the tariff. Thus the South based association At least with the EU, India should re-work on the free trade agreement and it will be a gift from the . Double our exports if this EU happens. This has been a demand for a lot of time. Industry is suffering.

Another challenge faced by the industry is on the raw material which accounts to 60% to 65% of the total cost. “Raw materials should be made affordable. By and large, in cotton, we are globally competitive in terms of quality and pricing. However, when it comes to synthetic material, our fibre is expensive by 20% to 30% compared to China. Some of the hidden factors are import duty, IGST, anti-dumping duty and import-parity-pricing policy.”, Selvaraju says. China, out of the total production has 80% of synthetic material and 20% cotton material while in India is it the other way round. In India it is the other way round with 80% cotton and 20% synthetic. According to him, in the market, cotton has attained a saturation point. “The Textile Ministry, on the potential of textile business in India estimates to 350 Billion USD potential (2X growth). To attain that, we need about 22 Billion Kilo Gram of raw material. However, we have only 9 million Kilo Gram. If we need high growth, we need extremely high growth in the synthetic segment, especially the poly ester”, he concluded.

By: Swaminathan Balasubramanian