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Web Exclusive | February 2019

Indian cotton sector losing due to tariff issues: CITI

India’s cotton yarn and fabric exports are struggling because of the duty disadvantage faced by the Indian exporters in major markets, pointed out the Confederation of Indian Textile Industry (CITI). There has been a continuous decline in exports of cotton yarn and fabric during 2013-14 to 2017-18. Cotton yarn exports fell by 25 per cent during the period.

“Indian spinning mills performed well in exports during 2013-14 when the cotton yarn was covered under schemes such as 2 per cent incremental export incentive, 2 per cent interest subvention and 3 per cent focus market incentive and the sector could penetrate into alternate markets other than China. However, suddenly all incentives were withdrawn leading the spinning mills high and dry,” said out CITI chairman Sanjay Jain.

China which is the largest importer of cotton yarn has shifted from India to Vietnam/Indonesia as they have duty free access while Indian yarn carries 3.5 per cent import duty. From 2013 to 2017, there has been a decline in India’s cotton yarn exports to China by 48 per cent while exports from Vietnam and Indonesia has increased at a remarkable rate of 129 per cent and 55 per cent respectively in the same period

He further stated that India’s raw cotton is going to various markets at zero duty. "India exported $1894 million worth raw cotton in 2017-18. Exporting of raw cotton bales instead of value addition by converting to yarn and fabric is leading to loss of valuable foreign exchange, employment and better remuneration to farmers."

Similarly, fabric exports from India are at serious disadvantage vis-à-vis exports from competing countries due to duty differentials in leading exports markets. Markets like EU, China, Turkey, and Vietnam impose an import duty in the range of 8-12 per cent on Indian fabric while duty-free access is given to countries such as Pakistan, Cambodia, Bangladesh and Cambodia.
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