By Our Special Correspondent
MUMBAI, JUNE 05
The Indian government should allow imports of raw cotton at zero duty without any predetermined time limit or restrictions. This will enable the spinning mills to book imports of cotton well in time and at reasonable prices in the coming season and subsequent seasons.
The duty free imports will help mitigate the cotton price rise and bring stability to the volatile cotton market. If duty on cotton imports is removed, the import parity pricing and squeezing by cotton trade in the off season will not be possible, thereby brining cotton price stability in the market and ensure seamless working of the entire cotton supply chain.
It may be noted here that during the current season, countries like Bangladesh which mainly depend on imported cotton, through-out the year kept booking imports of cotton at various prices points. However, because of the import duty, Indian spinners could not book when the Ice Futures went down to 105 cents from 120 cents around January 2022 and subsequently rebounded again and which is currently traded at above 150 cents, informed a prominent mill owner from North India.
The cotton importing nations kept covering cotton at all levels from December to January and February which is the best time to book import cotton so as to start imports arrivals in April month onwards. Since Indian spinners missed this bus, the entire cotton supply chain is undergoing a difficult period of high costs.
Hence, allowing zero duty cotton imports around the year will ensure stability of prices within the cotton value chain and help meeting domestic and international demand of cotton yarn, textiles and garments without price pressures. The sources pointed out here that the import duty of over 10% imposed in 2021 budget has resulted in cotton hoarding during the arrival season by large traders dealing in cotton globally who have access to cheap funding.
Therefore, keeping the cotton import window open at zero duty will ensure that cotton hoarding does not take place by those with vested interests as the advantage of covering cotton in huge quantities will be eroded.
Allowing duty free imports of cotton is not a threat to domestic cotton, according to mill industry sources. If one takes into account the import cotton scenario of the last decade, it shows that cotton imports has been in the range of 15 to 20 lakh bales of which majority is Extra Long Staple Cotton which is not grown in India and contamination free cotton.
The only time the cotton imports sky-rocketed to 25-35 lakh bales was during the US and China Agri-Trade war era crop years of 2017 to 2019 because the global cotton futures crashed in that period and ICE cotton futures, remained avg. between 60-70 cents per pound with touching low of around 50 cents plus in the year 2019. Barring the above aberration, the cotton imports have always been low key.
Hence, there is no threat of influx of huge quantities of cotton in India due to duty free imports, mill industry sources pointed out. The Indian government should realise the above facts and ensure that stability prevails in the cotton supply chain. The government should do away with the import duty of over 10% imposed in 2021 budget and empower the cotton textile and apparel industry to scale new heights. (Source: Tecoya Trend)