India's textile industry seeks the removal of the 11% cotton import duty. A Gherzi-ICAC study warns rising domestic prices and falling productivity are eroding the sector's competitiveness, leading to stagnant exports and idle capacity.
India's textile industry has sought the removal of the 11 per cent import duty on cotton, warning that rising domestic cotton prices and falling productivity are hurting the competitiveness of the sector, according to a Gherzi-ICAC study released by the Confederation of Indian Textile Industry (CITI).
Speaking on the findings of the study, Navdeep S Sodhi, Partner at Gherzi Textile Organisation, said the import duty has emerged as a major short-term challenge for the textile industry. "We have identified the short-term issue that is the 11 per cent import duty on cotton because that is increasing the cost of raw material for our industry. So that issue needs to be addressed with urgency," Sodhi told ANI.
Key Challenges Hurting Competitiveness
He further said the domestic textile industry has been facing a widening demand-supply gap and rising pressure on costs over the last few years. "To meet the requirement of the industry, we will need to bridge the demand-supply gap, and our domestic production of cotton needs to be increased to meet the increased demand," Sodhi said.
Highlighting one of the key concerns flagged in the study, he said domestic cotton prices have remained above international prices over the past four to five years, affecting India's export competitiveness. "Our domestic prices have been growing and rising above the international prices. So that gap has affected the competitiveness of our industry," he said.
Impact on Industry Performance and Farmer Income
According to Sodhi, the impact of the price disparity and supply gap is visible across exports, investments and employment in the textile sector. He noted that capacity utilisation in the industry currently stands at only 75-80 per cent, with many spinning and textile mills operating with idle capacity.
"Our exports of cotton textiles have been stagnant in the last few years," he said, adding that shrinking profitability has also slowed fresh investments in the sector. "Their margins have gone down significantly, so their surpluses for investment have contracted."
The study also highlighted the impact of declining cotton productivity on farmers' income. Sodhi said cotton productivity has fallen by nearly 20 per cent, affecting farm earnings and pushing several farmers to shift towards other crops. "Because the productivity has gone down by about 20 per cent, the farmers' incomes have been affected," he said.
Industry Welcomes Cotton Mission, Calls for Further Support
The industry body also welcomed the Union Cabinet's recent approval of the Rs 5,659 crore Cotton Mission aimed at boosting productivity and improving cotton quality. "The government took a big decision this week to announce this cotton productivity mission and we believe that this is the decision in the right direction," Sodhi said.
He added that improving cotton quality, quantity and productivity would strengthen the competitiveness of the entire textile value chain. "There will be a lot of focus on research and development, on more disease-resistant varieties of cotton and also varieties of cotton which are more climate resistant," he said.
He also called for easier and cheaper financing for the textile industry, particularly MSMEs, and a stable cotton supply through agencies such as the Cotton Corporation of India.
West Asia Crisis Adds to Industry Woes
Commenting on the impact of the ongoing West Asia crisis, Sodhi said the textile sector is facing pressure from rising raw material costs, logistics expenses and weakening global demand. "The derivatives of crude oil, such as the derivatives that go into the making of synthetic fibres like PTA [Purified Terephthalic Acid], Naphtha and so on, they have all more than doubled," he said.
He added that fertiliser prices have nearly doubled during the period, increasing cotton production costs, while freight and insurance expenses have also risen sharply. "The companies have to pay more on insurance, on freight and so on," Sodhi said.
According to him, inflationary pressures arising from the conflict could also weaken consumer demand globally. "The WTO has reduced the growth forecast for trade to a very low level. So it will have an impact on the supply side as well as on the demand side," he said. (ANI)
(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)