Cotton players wary over price surge, special duty

The Budget has extended special additional duty to all imported goods. This will apply to both agricultural and non-agricultural imports. Though certain items have been excluded, cotton now attracts a 4% additional duty, industry players and officials said. The 10% duty has also been retained, they added.

“Just like wool, cotton too should be exempted from import duties,” SV Arumugam, chairman, Southern India Mills’ Association (SIMA), said. Extra long staple varieties, mainly the US Pima and Egyptian Giza, account for most of the cotton imports into the country.

Many leading garment makers prefer yarn made out of imported cotton as it ensured better quality, industry players said. “The additional duty will have an impact on those importing cotton for producing yarn mainly for the local market,” Ashwin Chandran, director (operations), Precot Mills, said.

Industry players pointed out that as most mills have opted for nil excise duty, “there is no scope for availing themselves of Modvat credit.” “The additional duty will totally erode our competitiveness,” K Selvaraju, secretary of the association said. The association has taken up the issue with the finance ministry through the Confederation of Indian Textile Industry (CITI).

Against an estimated consumption of 9 lakh bales of extra long staple cotton, the country produces only 4 lakh bales. Mills in Tamil Nadu consume about two-third of this variety of cotton, which is used for spinning fine and superfine yarn.

Prices had jumped 30% due to a huge-demand supply gap during the end of last year. This also had a cascading effect on the yarn market and the shortfall in global production. It even resulted in the cancellation of forward contracts by Egypt.

Source: The Economic Times