Demand crunch: Textile sector bats for stimulus, cotton import duty removal

Textile industry players are batting for removal of import duty on cotton and a stimulus from the government after being hit by a dip in demand due to the global financial crisis and the Ukraine war. The industry has been also affected by the rise in Indian raw cotton prices, which are at least 10-20 per cent higher than international cotton right now.

“The rate of Indian raw cotton is 10-20 per cent higher than the international cotton, including the Chinese cotton. This makes Indian spinning mills not to source cotton from India due to the higher rate. At the same time, the Government of India has imposed 11 per cent import duty. This spoils the level-playing field,” said K Venkatachalam, chief advisor, Tamil Nadu Spinning Mills Association (Tasma).

India’s cotton textile and raw cotton exports dipped by 29 per cent to $5.406 billion in the April-September period, compared to $7.606 billion during the same time in 2021-22. During the same period, cotton textile exports dipped by 23 per cent to $4.791 billion as against $6.468 billion last year. Similarly, raw cotton exports too declined by 62 per cent from $1.138 billion from April to September 2021 to $435.9 million in 2022, according to the data shared by the Tasma.

“Our cotton rates are not competitive globally. Domestic market is also shifting faster from cotton to polyester and consumption is down. Hence, the government should remove the import duty and make our raw materials at par with international prices,” said Sanjay Kumar Jain of Delhi-based TT Ltd.

This comes at a time when there is a shortage of demand for textile goods globally due to the Ukraine-Russia war. “Unless the Government of India proposes a stimulus package to textile industries at all levels, whether they are spinning, weaving, fabricating, ready-made garments and home textiles, most of the industries will become NPAs very shortly, as they are all working only for two to three days in a week and their efficiency has come down to the extent of 30 per cent only,” Venkatachalam added.

On the other hand, moving in line with the overall merchandise exports that dipped by 16.7 per cent to $29.8 billion in October, ready-made garment (RMG) exports too dipped during the month.

“Since most of the traditional markets of Indian RMG including UK, EU and the US are witnessing recession and global headwinds, leading to shrinking of demand on one side and buyers asking for 15 per cent discount on the other, we have requested the government for expediting FTAs in these markets and ensure all tariff lines of RMG sector, which will enable a duty reduction from the existing 9.6 per cent and act as a strong breather,” said Naren Goenka, chairman, Apparel Export Promotion Council (AEPC).

The total set target of apparel exports for 2022-23 is $17.6 billion as against $16.01 billion in 2021-22, out of which $ 9.2 billion was achieved during April-October 2022.

Tiruppur knitwear exports back in growth track

After clocking negative growth during the months of August, September, and October by 14.6 per cent, 24.4 per cent and -34.1 per cent, respectively compared to the corresponding months of last year 2021, Tiruppur knitwear exports turned positive in November by recording a 10.6 per cent growth. Tiruppur contributes to 55 per cent of the country’s knitwear exports, according to the Tiruppur Exporters’ Association (TEA).

The export date for the month of November 2022 reveals that readymade garment exports have reversed the negative growth and posted a positive growth of 22.71 per cent compared to November 2021.

“The positive growth in November is quite encouraging and factors like Economic Cooperation and Trade Agreement (ECTA) entered with Australia will come into effect from December 29 and the envisaged Agreement with UK will happen in another two months, will help to boost the knitwear exports from Tiruppur,” said K M Subramanian, President, TEA. He further noted that the UK and Australian buyers are interested to place orders with Tiruppur because of the China Plus one policy of the respective countries.

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