The textile sector has petitioned the Indian government to waive cotton’s 11% import charge. The levy on cotton imports was established by the Indian government three years ago. At the time, it made sense because Indian cotton was less expensive than cotton from other nations. The situation has now changed, with Indian cotton currently costing about 18–19% higher than the world average.
Although the cost of cotton may not soar during the off-peak season (April to September), the Indian textile sector is having trouble competing in the export market. The Southern India Mills Association (SIMA) has requested that tariffs be eliminated, at the very least during the current off-peak season.
Analysis of market pricing data reveals that the ICE cotton May 2023 contract is now trading at US $ 84.19 a pound, or roughly 152.22 per kg. Meanwhile, on Wednesday, the MCX cotton June 2023 contract was sold for 64,440 per candy weighing 356 kg (181 per kilogramme). At the moment, Indian cotton costs 19% more than ICE cotton.
Indian cotton often commands a premium of 5% to 7% over ICE cotton because of its superior qualities. However, other market variables are to blame for the current price discrepancy. Gujarat spots cotton prices was reported to be between 62,800 and 63,200 rupees per candy.
The chairman of SIMA, Ravi Sam, has pleaded with the Union Minister of Finance, Nirmala Sitharaman, to waive the import tariff on cotton from April to October. The government had taken this action the previous year to guarantee raw materials security, minimise industrial halts, and avoid a fall in exports. Sam said that because of the import tax, Indian cotton has increased in price, and some export orders have been lost. According to him, cotton textile exports have decreased by more than 23% from the prior year, making it crucial to provide cotton to the industrial sector at a competitive global cost. He stressed the need for duty exemption to improve export performance.
Sam continued by pointing out that while farmers have benefited to some level from the higher cotton price brought on by the import charge, dealers and international firms have benefited significantly. The Indian cotton textile value chain, which exports about two-thirds of the cotton produced in the nation as value-added textile goods, has, therefore, entirely lost its competitiveness.
