INDIA: Export sop fails to cheer textile sector
While creating a record in exporting close to 90 lakh bales in 2007-08 crop year, India has exported mere 5-7 lakh bales so far in 2008-09 crop year. However, despite a recent notification by the Centre offering 5% duty incentive on export of raw cotton, there is little cause for cheer in the domestic textile sector that has been starving for cotton.
The government on Tuesday announced a 5% duty incentive on export of raw cotton by including the fiber commodity in the Vishesh Krishi and Gram Udyog Yojana. Raw cotton shall be entitled for duty credit scrip on exports made with effect from April 1, 2008, till June 30, 2009, said the notification by the Directorate General of Foreign Trade.
As per Cotton Advisory Board estimates, India exported nearly 90 lakh bales in 2007-08 and is expected to export 50 lakh bales in 2008-09 following a drop in cotton production from estimated 322 lakh bales to 290 lakh bales. The available stocks, however, elude users owing to their prohibitive costs. Even traders and MNCs who hoarded cotton stocks in 2007-08 have kept off buying cotton in 2008-09.
Shankar-6 that touched Rs 30,000 per candy in 2008, now commands a price of Rs 19,500-20,000 per candy. While 210 lakh bales are estimated to have arrived in the market by now, significant stock (62 lakh bales) is being held by the Cotton Corporation of India that is selling it at Rs 20,900 per candy.
CCI chairman SC Grover tells ET: “CCI has purchased about 74 lakh bales in all the cotton growing states under MSP operations and disposed of about 12 lakh bales till date.” The inventory carrying cost is amounting to 1.25% per month of the value of purchase, he said, a reason which justifies the recent export incentive. The industry however, is not buying the argument. Confederation of Indian Textile Industry claimed that most of the cotton exports from India during April 2008-February 2009 have been effected by a handful of large traders — about 4-5 large international traders and a similar number of domestic traders.
“The retrospective benefit will be only for them. The amount of incentive on past exports would amount to around Rs 250 crore and the future exports will also be by the same people. The farmers will get no benefits,” said CITI secretary general DK Nair.
In a letter to secretary (textiles) Rita Menon, CITI’s deputy chairman Shishir Jaipuria added that providing export incentives for a primary raw material like cotton will pass on the advantage of Indian cotton to our competitors — China, Pakistan, Bangladesh and Indonesia.
“Our textiles are already out priced in international markets and the export incentive for cotton will further aggravate this situation,” he stated.
CITI held a meeting with Union minister of textiles Shankarsinh Vaghela on late Wednesday evening. The Southern India Mills’ Association chairman KV Srinivasan added that the export incentive would benefit only the middlemen, particularly the cotton exporters and not the farmers.
He added that considering farmers have sold most of their cotton during October-January, the move will benefit only the traders. Even exporters are a worried lot fearing hike in price by CCI to make up for its losses.
“Although it could benefit us, we wonder if CCI would hike cotton price by 5% in wake of the announcement,” said a leading exporter from Mumbai.
Added: February 20, 2009 Source: Agencies