Due to a duty disadvantage India is lagging in cotton exports to major markets in regards to Bangladesh, Pakistan and Vietnam. Indian cotton yarn export to the likes of EU and China slumped 25pc in the last 5 years, whilst fabric export decreased to 7pc.
According to the Apex Chamber of Indian Textiles, the exports of Indian cotton yarn exports decreased to $3.4 billion in 2017-18, from $4.5 billion in 2013-14. The largest cotton yarn importer, China has replaced India with Indonesia and Vietnam because of their duty free access while the exported Indian yarn carries a duty of 3.5pc. Similarly, Indian exports of cotton yarn are subject to a 4% duty in the EU, while Vietnam and Indonesia have a 3.2% tariff and least developed countries (LDCs) get duty-free access.
CITI has suggested inclusion of cotton yarn and higher incentive for fabric — from the current 2% —in the Merchandise Exports from India Scheme, to make them competitive.
Mr Sanjay K Jain, chairman, CITI said, “Indian spinning mills performed well in exports in 2013-14, when cotton yarn was covered under schemes such as 2% incremental export incentive, 2% interest subvention and 3% focus market incentive. The sector could penetrate markets other than China. The fall in cotton yarn and fabric exports is impacting the entire value chain — from farmers to spinners, weavers and knitters. There is considerable exportable surplus but we are not able to be overcome the tariff disadvantage despite being competitive in both spinning and weaving.”
However, withdrawal of these incentives left the mills high and dry. The industry, said Jain, is forced to sell cotton yarn at lower prices due to a surplus. In case of fabric, Indian exports are levied 8-10% duties, which is 6.4% maximum for other exporting countries.
According to the CITI analysis report, instead of being converted to yarn or fabric India’s raw cotton is going to various markets at 0 duty resulting in loss of foreign exchange as well as employment. India exported $1.9 billion of raw cotton in 2017-18.
