Stating that the imposition of 10 per cent import duty on cotton is a severe blow for the cotton textile value chain, The Southern India Mills’ Association (SIMA) has appealed to the Prime Minister for withdrawal of the duty.
However, it has hailed the announcement of MITRA scheme aiming at developing seven mega textile parks with plug and play facility.
India has been globally competitive only in cotton textile manufacturing, thereby accounting for 80 per cent of its total exports.
As per Union Budget 2021-22, cotton and cotton waste which is currently under nil rate of import duty is being subjected to 10 per cent import duty through the budgetary announcement comprising of 5 per cent Basic Customs Duty and another 5 per cent Agriculture Infrastructure and Development Cess (AIDC) on cotton and 10 per cent BCD on cotton waste. The new import duty comes into effect from February 2, 2021. “This has come as a severe blow for the ailing cotton textiles and apparel industry,” SIMA chairman Ashwin Chandran said in a press release.
He appealed to the Prime Minister to immediately withdraw the levy of 10 per cent import duty on cotton and cotton waste to sustain the global competitiveness of Indian textiles and apparel industry and prevent job losses for several lakhs of people, prevent fall in the exports and also curb cheaper imports of value-added products from the SAFTA countries like Bangladesh, Sri Lanka, etc.
“The levy of 10 per cent duty will not benefit the cotton farmers as the normal import of 12 to 14 lakh bales per year accounts for only around 3 per cent of Indian cotton production and consumption and such cotton is not produced in India. But this is essential to sustain the share of value-added / niche markets of India, both in global and domestic markets,” Chandran said.
He added that after the introduction of Bt cotton that accounts for over 97 per cent of the cotton produced in the country, the cotton textile industry has to import extra-long staple (ELS) cotton, organic cotton, contamination free cotton to the tune of 10 to 12 lakhs bales per year to meet the demands of the global customers and also the value added made-ups and apparel segments of the domestic market.
He said the sudden announcement of levying import duty on cotton has come as a rude shock for the industry that is just coming out of the ill effects of COVID-19. The levy on cotton has also defeated yet another government policy of addressing inverted duty structure in the GST, as the cotton value chain attracts 5 per cent GST and will add the cost to the customers and discourage value addition.
“The MSME and decentralised nature of the yarn, fabric and garment manufacturers in the country will not be in a position to take advantage of Advance Authorisation Scheme and such scheme would benefit only the vertically integrated units that account less than 10 per cent of the exports,” the release said.
“The Government had withdrawn the import duty on cotton during July 2008 consequent to the severe recession faced by the industry and also a nation-wide bandh by the entire cotton textile value chain. When the import duty was there, the multinationals used to cover major volume of cotton and export, and thereafter the industry had to import cotton at higher price and thereby the foreign exchange also got affected,” Chandran said while urging the Prime Minister to withdraw the duty on cotton and cotton waste to sustain the global competiveness of the cotton textile value chain and make Aatmanirbar Bharat vision a reality.
SIMA chairman thanked the government for announcing the Production Linked Incentive (PLI) Scheme by allocating ₹1.97 lakh crore, including ₹10,683 crore for textile industry, giving thrust to develop the global competitiveness in the MMF textile value chain. He said that the focus product incentive scheme under PLI Scheme for MMF and technical textiles would give enormous opportunity for the growth of Indian MMF and technical textile products.
Hailing the announcement of MITRA scheme aiming at developing seven mega textile parks with plug and play facility and facilitate 40 to 50 leading textile players to become global champions, Chandran said that Tamil Nadu being the largest textile manufacturing state, is planning to develop three mega parks under MITRA, as Andhra Pradesh and Telangana are already having one such park each. “This would facilitate attracting large scale investments including FDI and JVs.”
Welcoming the allocation of ₹700 crore for TUF Scheme and ₹80 crore for SITP, Chandran hoped that additional allocations would be made liberally based on the claims filed by the ministry of textiles. He added that there is a backlog of over ₹10,000 crore under TUFS for several years and hoped that the Government would release the same during the financial year 2021-22 to enable the industry to make investments and create jobs under different schemes.