Exports of cotton yarn in the first six months of the current fiscal year FY20, from April to September 2019, have declined sharply by over 38 percent. Exports during this period touched US$1,276 million as against US$2,086 million in the same period in 2018-19. Exports of cotton yarn have registered a negative growth in every month since April 2019.
“The continuous fall in exports of cotton yarn is a matter of deep concern,” said Dr. KV Srinivasan, Chairman of The Cotton Textiles Export Promotion Council (TEXPROCIL). Exports of cotton yarn to leading markets such as China, Bangladesh, Vietnam, South Korea, Colombia and Turkey have dropped significantly, pointed out Dr. Srinivasan.
Further, exports of value added products such as fabrics and made-ups have grown only by a marginal 1.87 percent in the current fiscal year. This combined with a lukewarm domestic demand has further aggravated the situation for the cotton yarn spinning sector, according to Dr. Srinivasan. Many spinning mills are reportedly on the verge of closure, he adds.
Cotton Yarn is the only product which has not been granted export benefits such as MEIS (Merchandise Exports from India Scheme) or the 3 percent Interest Equalization Scheme. In addition, exporters of Cotton Yarn are at a serious disadvantage against competing countries due to differential import duties in leading export markets. There is an import duty ranging from 3.5 to 5 percent on cotton yarns imported from India into major markets like China, EU, Turkey and South Korea as against imports from competing nations like Bangladesh, Cambodia, Pakistan, Indonesia and Vietnam which enjoy the benefit of zero duty in these markets.
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Cotton yarn also bears the incidence of State and Central taxes on inputs which are not being rebated as in the case of Made-ups and Garments, raising prices and ultimately having an adverse impact on competitiveness in export markets.
Dr. Srinivasan said, “Cotton yarn is a product with substantial value addition taking place within the country and its exports need to be encourage.” He pointed out that only about 27 percent of the total production of cotton yarn is being exported, and there will not be any shortage in the country both for export and domestic production if exports increase.
Dr. Srinivasan appealed to the Government to include cotton yarn under the MEIS, 3 percent Interest Equalization scheme, and the Rebate of State & Central Taxes and Levies (RoSCTL) scheme so that exports of cotton yarn can increase, which in turn will benefit cotton farmers.