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India to Impose Duty on Cotton Imports

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Seshadri Ramkumar, Texas Tech University

Indian government to impose custom duty on raw cotton imports. On February 1, Honorable Mrs. Nirmala Sitharaman, Union Finance Minister of India introduced the Indian budget for the financial year 2021-22.

The budget is built on six pillars that focus on: 1) Health and Wellbeing; 2) Physical & Financial Capital, and Infrastructure; 3) Inclusive Development for Aspirational India; 4) Reinvigorating Human Capital; 5) Innovation and R&D and 6) Minimum Government and Maximum Governance.

As a move to support farmers, Government will impose a 10% custom duty on cotton imports, which has been nil at present. While the budget has received positive feedback from the textile sector, spinning sector is feeling the pinch due to the duty on imported cotton.

The budget supports boosting the textile sector and enhancing its global competitiveness with investments for Mega Investment Textile Parks. Seven textile parks will be established within three years. To enhance the manmade fiber sector, import duties on raw materials like nylon fiber and yarns, nylon chips and caprolactam have been reduced from 7.5% to 5 percent. This duty structure is similar to polyester and other manmade fibers. Duty on raw silk and silk yarns will be increased from 10 to 15 percent.

India’s textile sector for fine count spinning has been importing cotton from countries like Egypt and imposing duty may affect the competitiveness of the spinning sector. Countries like Vietnam and Bangladesh have been doing well in garments exports to United States and Europe, and this duty may negatively impact the Indian spinning sector and the value chain.

“Overall, the budget has positive aspects but for the custom duty on cotton imports,” stated, Gandhiraj Krishnasamy, General Manager of Coimbatore-based Lakshmi Card Clothing, 40 years veteran in the textile sector. “Indian industry needs scale to compete against other countries,” added Gandhiraj Krishnasamy.

Jayalakshmi Textiles, which has about 70,000 ring spindles and spinning fine count yarns has started recently importing Egyptian Giza cotton as its price was competitive against Indian DCH-32. In fine count yarns, customers are demanding the use of imported cotton and hence this industry has recently purchased about 500 tons of Giza cotton. “Custom duty on cotton may add pressure to the Indian spinning sector,” stated Velmurugan Shanmugam, General Manager of Aruppukkottai-based spinning mill, whose average yarn count is about 70s Ne.

The budget is in the right tract with enhancing the domestic sector in terms of value-addition, agriculture, and innovation. The custom structure on cotton puts emphasis on the Indian cotton sector to focus on research, quality enhancement, contamination reduction and build the overall infrastructure.

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