Industry And Cluster | News & Insights

Cotton import duties should be abolished since they are detrimental to garment exports

Published: June 29, 2021
Author: Manali bhanushali

The Cotton Association of India (CAI) is concerned that India may lose its competitiveness in the world market to China, Pakistan, and Bangladesh. With a 10% customs levy on cotton variants such as extra-long staple (ELS), export-oriented clothes and cotton-madeups become more expensive, giving close competitors an advantage.

On February 2, 2021, a 10% customs charge was levied on cotton imports. The CAI has written to Union Finance Minister Nirmala Sitharaman, requesting that duty be removed. In the letter, Atul Ganatra, President of the Cotton Association of India, stated that India generated just 5-6 lakh bales (each weighing 170 kg) of ELS cotton, compared to a local need of 12 to 15 lakh bales of ELS and 5-7 lakh bales of non-ELS contamination-free sustainable cotton.

“India hardly produces this type of cotton and there is a clear shortfall of the same. India requires such ELS and contamination-free sustainable cotton not produced in our country to cater to the international demand. Due to the imposition of 10 per cent import duty on cotton, this raw material, which is being imported in India, has become costly thus reducing our competitiveness vis-à-vis other countries like China, Bangladesh, Pakistan and Vietnam,” Ganatra said.

CAI has encouraged the Finance Minister to remove the 10% import duty on cotton immediately since it is not in the national interest and causes more harm than benefit to our own textile industry. Cotton was grown under the Open General License (OGL) Scheme, which allowed it to grow without any quantitative or qualitative limitations.

Furthermore, ELS cotton prices in India are highly high, with a range of ELS Kapas rates in the country ranging from $8,500 to $9,000 per quintal, which is around 2,500 or 30% higher than the Minimum Support Price (MSP). As a result, the reduction of the 10% import duty on cotton has no negative impact on farmers’ interests, according to Ganatra. According to the letter, the Cotton Association of India supports a free trade policy for cotton export and import and opposes any tariffs.

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