Prices of the commonly used cotton variety have more than doubled to breach the Rs 90,000-mark per candy of 356 kg in India since February 2021, when an import duty was raised. Local cotton prices have also exceeded global rates by Rs 1,500-2,000 per quintal. A sharp jump in domestic cotton prices, caused partly by a drop in output, has hit the country’s textiles-and-clothing value chain, rendering hundreds of thousands jobless.
Yarn manufacturers and garment units face the grim prospect of losing their shares in export markets, where they made rapid strides in FY22. Industry officials say that scores of export orders have either been canceled by western buyers or diverted to India’s competitors like Bangladesh, Vietnam, China, and Pakistan after the steady spurt in cotton prices forced domestic players to renegotiate deals.
Cashing in on a resurgence of demand from advanced economies, India had shipped out textiles, garments, and allied products worth almost billion in FY22, up 67% from a year before (albeit aided by a lower base).
Thousands of power looms, texturizers, hosiery units, and dyestuff manufacturers are being forced to suspend or cut their operations. At the same time, spinning mills and large garment clusters, too, have frozen production as output prices in local and export markets are barely in sync with the inflated cost of cotton.
Saurin Parikh, president of Spinners’ Association – Gujarat (SAG), said: “The rate of increase in cotton yarn prices in key global markets – from Rs 280 per kg in early February to Rs 370 per kg now – has been less steep than the rise in domestic cotton prices. In such circumstances, cotton yarn makers in Gujarat are finding it difficult to continue production activity.
”
Cotton imports in India are taxed at 11% (including cess and surcharges), while Vietnam and Bangladesh allow their industries to buy the fiber from abroad at zero duty. This offers India’s competitors a substantial advantage in raw material costs and duty-free access to critical markets like the US and the EU, which New Delhi does not enjoy.
