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Demands For removal of import duty on cotton

  • Category
    Economy
  • Published
    7th Dec, 2021

Context

Tamil Nadu chief minister recently urged the Indian government to remove 11 per cent import duty on cotton.

Background

  • Textile industry is the second largest employment provider in the state and Tamil Nadu accounts for 1/3rd size of the textile business of the country.
  • Due to this, a large number of apparel and textile units may soon become unviable resulting in closure and consequent large-scale unemployment and industrial unrest, Stalin was quoted as saying by a news agency.
  • Earlier, Cotton Association of India (CAI) has expressed concerns of India losing its competitiveness to China, Pakistan and Bangladesh in the international market.
  • With 10 per cent customs duty on cotton varieties including extra-long staple (ELS), the export-oriented garments and cotton-made-up become costlier thereby giving an edge to the close competitors.

Analysis

What are the major demands?

  • Removal of 11 per cent import duty on cotton.
  • Revamp' of the commercial terms and conditions prescribed by the CCI for e-auction of cotton by reducing the minimum lot size to 500 bales which is sustainable for the MSMEs.
  • Extension 5 per cent interest subvention to spinning mills for procurement.

Reasons for the demand

  • One of the major reasons for the cotton price volatility is the imposition of 5 per cent basic customs duty (BCD), 5 per cent agriculture infrastructure development cess (AIDC) and 10 per cent social welfare cess in the budget 2021-22.
  • Another reason for spurt in cotton prices is the bulk discount offered by the Cotton Corporation of India (CCI) to the traders who procured almost 70 per cent of Minimum Support Price (MSP) cotton auctioned by CCI at a lower rate during the cotton season due to availability of 90 days free period and thereafter speculated the market.
  • The present crisis has led to mass cancellation of export orders and hardships in fulfilling long term export commitments.
  • If the import duty is not removed, our domestic prices will go up further and create more hardship to the domestic textile sector viz. spinning, weaving and garment industry.

Present scenario of cotton cultivation in India

  • India has the distinction of having the largest area under cotton cultivation which is about 42% of the world area under cotton cultivation between 12.5 million hectares to 13.5 million hectares.
  • India is one of the largest producers of cotton in the world accounting for about 26% of the world cotton production. The yield per kgs hectare which is presently 459 kgs/ha is still lower against the world average yield of about 757 Kgs kgs /ha.
  • Cotton production is expected to reach 37.10 million bales and consumption is expected to reach 114 million bales in FY21—13% growth over the previous year.
  • The production of raw cotton in India is estimated to have reached 35.4 million bales in FY20^. During FY19, production of fibre in India stood at 1.44 million tonnes (MT) and reached 2.40 MT in FY21 (till January 2021), while that for yarn, the production stood at 4,762 million kgs during same period.
  • India’s home textile exports grew at a healthy rate of 9% in FY21 despite the pandemic.

Indian cotton production zones

  • The planting period of cotton normally is from March to September, while the harvesting period is from October to February. There are mainly three cotton-producing zones in India, such as:
    • Northern zone (Hirsutum and Arboreum Zones), comprising Punjab, Haryana and Rajasthan.
    • Central zone (Hirsutum, Arboreum, Herbaceum and Hybrid Zones), comprising Maharashtra, Madhya Pradesh and Gujarat.
    • Southern zone (Hirsutum, Arboreum, Herbaceum, Barbadense and Hybrid Zones) comprising Andhra Pradesh, Karnataka and Tamil Nadu.
  • About 70% of total cotton are produced in Gujarat, Maharashtra and Andhra Pradesh. The northern region produces short and medium staple cotton, the southern region normally produces long staples cotton, while the central region produces long and medium staples. The peak marketing season for the crop is during November to March.

Technology Mission on Cotton

  • Technology Mission on Cotton was launched in February, 2000 with the objective to increase cotton production, productivity and improvement in cotton quality, to increase the income of cotton growers and ensuring abundant supply of quality cotton to the textile mills.
  • Since then, the TMC is being implemented through its four Mini Missions (MM) for achieving the above objectives.
    • Mini Mission-I deals with the research and development of cotton production technologies and Indian Council of Agricultural Research (ICAR) is the nodal agency for its implementation.
    • Mini Mission-II deals with extension & development activities for increasing production and productivity, which is being implemented by the Department of Agriculture & Cooperation.
    • Mini Mission III deals with the objectives of improvement of marketing infrastructure through setting up new market yards and activation/ improvement of existing market yards.
    • Mini Mission-IV is looking after the modernisation of ginning and pressing factories.
  • The Mini Mission-III & IV are implemented by the Ministry of Textiles.

Conclusion

India is working on major initiatives, to boost its technical textile industry. Owing to the pandemic, the demand for technical textiles in the form of PPE suits and equipment is on rise. Government is supporting the sector through funding and machinery sponsoring.The future for the Indian textiles industry looks promising, buoyed by strong domestic consumption as well as export demand.

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