Several textile industry bodies in India recently urged the government to announce stimulus measures under active consideration, such as immediate release of pending dues, debt restructuring for micro, small and medium enterprises (MSMEs), e-auctioning of cotton by the Cotton Corporation of India (CCI), and export credit facilities for all textile products.
This was conveyed at a recent press conference in Coimbatore jointly addressed by the chairmen of the Confederation of Indian Textile Industry (CITI), the Cotton Textiles Export Promotion Council (TEXPROCIL) and the Southern India Mills’ Association (SIMA).
The textiles and apparel industry is currently facing severe liquidity crunch, primarily because of the huge accumulation of government dues, especially the Technology Upgradation Fund (TUF) subsidies amounting to Rs.11,000 crore; refunds related to the goods and services tax (GST); and arrears of rebate of state levies (RoSL) and rebate of state and central taxes and levies (RoSCTL) pending since March 7 this year. It is essential to release the government dues on a war footing, CITI chairman T Rajkumar said.
The organizations requested that the debt restructuring package for MSMEs may be extended for the entire textile industry value chain as this would save many companies from turning into non-performing assets.
Consequent to the 26-28 per cent rise in the minimum support price (MSP) for cotton for the cotton season 2018-19, Indian cotton has become expensive compared to international cotton, making it and Indian textile products uncompetitive in the international market.
This has resulted in sizable increase in imported cotton during the current season. India is likely to end with over 50 lakh bales closing stock for the current season due to reduced exports and increased imports. The Cotton Advisory Board estimated the closing stock to be 40.41 lakh bales.
CCI is geared up to procure around 100 lakh bales in the coming season and the volume is likely to increase if the current forecast of international price remain the same during the peak season of Indian cotton. In the past, CCI has been avoiding sale of MSP cotton and making it expensive that greatly affected the performance of the cotton textile industry.
Therefore, the organizations urged the government to come up with a cotton policy for the coming season that enables CCI to sell its MSP procured cotton on a regular basis at 5 cents lower than the international price during the peak season to avoid accumulation of stocks, with an exception to the actual users and also make the cotton available at international price during off season, said a press release from SIMA.
Adequate funding has to be provided by the government to reduce the carrying cost and minimise the losses incurred by CCI, they said.
The cotton spinning sector is currently facing an unprecedented crisis due to excess production capacity to the tune of 7 million spindles created taking advantage of the incentives offered by the textile policies of different states like Gujarat, Maharashtra and Andhra Pradesh. The cotton yarn consumption in the domestic market got stagnated during the last four years. Over 35 per cent fall in yarn exports in the recent months has aggravated the situation.
The average cotton yarn exports per month that prevailed over 120 million kg during 2013-14 has now dwindled down to less than 60 million kg due to the US-China trade war and duty-free access enjoyed by Vietnam and other countries in the Chinese market. The sluggish demand has severely affected the cotton farmers as the country is left with excess cotton production. The situation is likely to worsen in the coming year even though the budget has already provided Rs.2,000 crore for MSP operation.
Hence, it is essential to boost cotton yarn exports in the interest of over 15 lakh people employed in the spinning sector, millions of cotton farmers and avoid over 3500 spinning mills, predominantly MSME units, from turning NPAs, the organizations said.
Extending export benefits for cotton yarn will not affect the garment or made-up segments as the country is left with huge surplus spinning capacity and surplus cotton.Including fabrics under RoSL benefit is needed to encourage fabric nomination business of global brands and boost power loom-handloom fabric exports, which has stagnated during the last few years and still struggling with huge surplus production capacity.
Cotton yarn has been excluded from the new Remission of Taxes, Duties on Export Products (RoTDEP) export benefit scheme that will come into effect from January 1.
Cotton spinning sector, being highly capital intensive, is currently left with over 7 million spindles surplus capacity. Hence, it is essential to include cotton yarn under the new scheme to benefit benefit millions of cotton farmers and the spinning sector, the organizations added.